Simple Money by Tim Maurer

Author:Tim Maurer [Maurer, Tim]
Language: eng, eng
Format: epub
Tags: BUS050030, Personal Finance—Religious aspects—Christianity
ISBN: 9781493403240
Publisher: Baker Publishing Group
Published: 2016-02-04T16:00:00+00:00

With that context, I must ask again: Can you afford it?

If you’re a parent (or grandparent) struggling under the weight of this decision, please consider the following: It’s actually irresponsible to prioritize your children’s education over your present-day solvency and your future retirement saving. It would be much easier for a child to repay a student loan than to bail out parents with health issues who didn’t save enough for retirement.

And how much school debt is too much? If you must incur debt to pay for school, try to keep the aggregate amount less than you can reasonably expect to earn in your first year’s salary. Otherwise, it will almost surely be a strain financially.

Step #2: Determine whether or not you will choose to pay

Educational and financial institutions who run college savings plans may prefer you to believe that it’s a cardinal sin to deny your children (or yourself) college funding, but that’s because they have a vested interest. Deciding to help your children with education costs is an admirable choice, but it’s still your choice. An unwillingness to offer your children a free ride doesn’t make you a bad person.

Step #3: Develop a Family Education Policy

A Family Education Policy is the clear articulation of the answer to a question most parents will hear from their children at some point: “So, how much will you pay for my college education?”

As with many important questions in parenting, I recommend that you initiate a preemptive strike here. Don’t wait until Johnny or Sally comes home to report what his or her friend’s parents are going to pay for. Be the first to discuss this with your child.

You might, for example, offer to pay 100 percent of an in-state public university’s costs if Junior keeps his grades up. But whatever you do, please don’t write a blank check with the naïve response, “I’ll pay for whatever school you can get into.” The law of adverse selection suggests you’ll end up paying top dollar for the warm-climate party school.

I recall one client, in particular, who had more than enough income to send each of his children to the school of their dreams. Instead, he used the context of college to send a parenting message. He and his wife offered to cover the financial costs of two years of education—the second two years. They wanted to ensure their kids were vested in their own educational decisions. They wanted to ensure their kids understood the value.

I’m not quite as tough. My wife and I have developed (and communicated) our own policy: we’ll cover up to the cost of four years of in-state tuition at one of our excellent state universities. This doesn’t mean we won’t support our two boys financially if they choose to attend a private school or an out-of-state university. But we’ll pay only for up to the price of an in-state state school. They will bear any excess costs, and I’ll encourage them to do so if they believe it will be in their long-term benefit.

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