This might be an odd topic, but I’ve been to 2 friends’ weddings in the last 3 weeks and all of a sudden I’m thinking of weird stuff. Anyway, I was watching Suze Orman’s show the other day (I love it) and two separate people called in asking about how to get out debt; they were drowning in bills from credit-card companies and car loans. Yet both of them were dutifully saving money towards their children’s college education.
This made me do two things: First, I took my burrito and almost hurled it at the TV. But I had covered it in a wonderful blend of 3 hot sauces so it was too delectable to let go. Also, it made me think about what I’m going to do for my kids’ education.
No, I don’t have kids and probably won’t for a while. But I think there are some interesting philosophical decisions behind how we treat money and our kids. It seems like the common American sentiment is, “Of course I’ll pay for my children’s education if I can.” I’m not sure it’s so simple, though. Maybe some parents can weigh in the comments, too.
First, let’s distinguish between if you can pay and if you can’t: The people on Suze’s show were wrong. They should have been taking the money for their kids’ education and using it to pay off their high-interest debt. Being financially responsible means being able to take care of yourself in old age. So if you can’t afford to save money for your kids, then this is a simple question! The 1st category of people, then, are those who can’t afford to help their children with educational expenses.
Then there are the people who can afford to help with all of their children’s education–and they do so. They cover it entirely. This is the 2nd category.
The third category is the one that interests me. It’s somewhere in between–maybe the parents are middle class and can contribute a little towards it. Maybe the parents are wealthy but want to teach their kids the responsibility of paying for part of their education.
Lessons from Stanford
Maybe it’s my ignorance, but by the time my kids go to college, I expect to be able to pay for them (don’t we all?). Let’s just assume that’s true for now. What will I do?
I was thinking back to my time at Stanford. Ok, so contrary to popular belief, Stanford students are not a bunch of rich kids driving BMWs around and flaunting their wealth. That’s USC. Yes, there are lots and lots of students from wealthy families but, interestingly, it’s pretty hard to tell from just looking at the student body: Everybody wears similar clothes and, somehow, the culture has developed so it’s just not cool to flaunt wealth. I felt right at home eating buffalo wings for dinner.
But one thing struck me: Most of my friends had parents who were contributing 100% of their educational expenses. It wasn’t an anomaly–it was extremely common. Now, part of this is understandable: With a price tag of $47,011 per year, hardly anybody could be expected to shoulder it themselves. And over half of Stanford students receive some kind of financial aid. But (at least from my anecdotal observations), it was almost always paid for by parents. And what interesting is that a lot of the students couldn’t imagine it any other way.
Stanford is an anomaly–that’s not how it is at most other colleges. In fact, “The average college senior graduated [in 2006] with more than $19,000 in debt” (more from USA Today). And from talking to my friends at other schools, many of them are paying for it themselves.
This disparity between Stanford students and others made me realize 2 things:
1. We take the cultural assumptions around us for granted, assuming that if it’s true for our friends, it must be true for everyone. There’s a psych term for this, but I can’t remember. Anyone?
2. I don’t know what I’ll do for my kids’ education
1 of 4
The idea of “if you could afford to pay for your kids’ education, why wouldn’t you?” is pretty compelling. And just because lots of people have their parents pay for their education doesn’t make them irresponsible, nor does paying for your own education necessarily make you responsible. But then I think about my family and get a different perspective.
I was 1 of 4 kids in my family, and we’re middle class. I think back to how many activities we were all involved in and I can’t imagine how my parents had the time to take us everywhere–or the money. That’s why when college time came around, our parents told us plainly that we’d have to get scholarships to afford it. So we did. My mom and dad taught us to worry about money last–“First, get in, then the money will take care of itself,” they always said. And when college-application time came around, we each applied to dozens of scholarships.
This strategy (“wait and it’ll work out”) is plainly opposite of the stuff I talk about on this site. I write about planning, investing for the long-term, making a budget, and more. But my parents’ strategy (if you can call it that) worked, too. By the time we all finish our education, the retail price tag will top well over $1 million, but we won’t have paid nearly that. Our parents helped out where they could, but we used scholarships and grants and loans to cover the rest.
“I walked to work, through the snow, uphill…”
Assuming that I will have enough to completely cover my kids’ educational expenses, will I? At this point, I’m thinking…probably not. Honestly, I think part of it may be for the same reason as your parents say, “When I was your age, I walked 15 miles to work, in the snow, uphill…” Maybe I think that earning scholarships, grants, and even taking on loans makes us a little more responsible. This isn’t saying I’ll stick them with all the bills, but maybe some (most?).
With that said, I don’t claim to understand how I’ll feel as a parent. God knows I still have a lot to learn about kids. The other day, I was at a BBQ and I turned around from talking to someone and knocked this infant over. Seriously, though, do you look at your feet wherever you’re walking? I felt bad and apparently so did the little boy, because he immediately started crying (of course). As I bent over to pick him up, every single person at the BBQ stopped to look at us: the shrieking child and the confused, rapidly retreating guy. Not knowing what to do, I tried to give him watermelon to quiet him down, but he just preferred to cry. Perhaps I met my match in persuasion on that fateful day.
Anyway, clearly I still have a lot to learn.
But I’m still kind of unsure what I’ll do. From a strictly financial perspective, in a few years I might want to start saving money for my kids’ education. That would be the smart thing to do. But my own experience growing up tells me, hey, assuming limited resources that we all have, maybe I should focus them on today and help guide them with scholarships and other ways of funding later on down the line.
Are the two mutually exclusive? Is this a case of the best decision vs. the financially smart one? I don’t know. But just like when I wrote that buying a used car isn’t the only smart choice, I’ve realized that this seemingly common sentiment of “We must save for our kids’ education!” isn’t the only way to go. So maybe the big takeaway for me is that, hey, if you have a very salient personal experience with something, then no matter what the objective personal-finance advice is, your decisions will be colored with that experience. This is the availability heuristic at work.
Parents, I’d be interested to hear what your thoughts are.