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Will I pay for my children’s education?

Ramit Sethi

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.

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  1. avatar
    Tim Grahl

    For my college (and other expenses growing up) my parents helped but made me pay a large portion of it.

    What is the goal of making your kids pay for things themselves growing up even if you can afford it? I believe it is so they understand the value of money and what it takes to earn it.

    Give your kids everything and they don’t respect money and just assume it will drop in their laps throughout life.

    Don’t give your kids anything (when you can afford to do otherwise) and I believe you will build a lot of resentment.

    While I was growing up my parents always put me in a situation where I could afford the things I needed and often wanted, but they made sure I felt enough pain to understand what it takes to have nice things.

    I paid cash that I had earned for a car a week before my 16th birthday, but they helped with the taxes, plates and other junk fees. They paid 1/3 of my college but I had to pay the rest… which was enough for me to always have a job and work two fulltime jobs the summer before my last year of college so I could be out of debt when I graduated.

    So keep in mind the goal of what you are trying to teach your children… if it’s the respect for money, find that line of making sure they realize what it takes to earn money and buy things.

  2. avatar

    Dude, that USC slam was SO fresh. Seriously, I’d say the percentage of spoiled rich kids at USC, UCLA, Stanford, and Cal is about even. And while USC may have, in the 70’s and 80’s, been all about the money, they are now academically way more selective and competitive.

    Its time for the “University of Spoiled Children” jokes to go away, they haven’t been true for about 10 years.

  3. avatar

    I think this is an interesting discussion. My parents paid for all of my college expenses (although nothing in the way of extra spending money, I had to work summers for that). It worked out well because I graduated as a chemical engineer from ucla in 4 years (which really ended up saving money).

    Point is, when my dad was giving me all this money he questioned whether or not he should do so. I assured him that I would pay it back by, essentially, paying it forward. I promised to pay for my kids college education. So, for this reason, I feel obligated to pay for my children’s education. I guess maybe that means that I should just have 1 😉

  4. avatar

    I think a lot of Stanford parents (and Berkeley and Harvard parents, an unscientific sample of my friends) felt that they wanted their children to concentrate 100% on school and personal development through college. Both of my parents paid for their own educations entirely on their own, and wanted to give me the gift of four blissful years being self centered developing an identity and focused on studying. It made studying abroad possible where otherwise I would not have been able to go, it allowed me to participate in many clubs and student groups I might not have had time for, and when job interviews and exam times stressed me out, at least I had time to cry.

    But seriously, I think a lot of parents have the same attitude…they see college as some of the best years in life, and want their children to have as much freedom as possible to take advantage of those opportunities.

    My parents took a similar attitude as Tim’s towards buying me things I wanted when I was younger. They made it so I had to feel some of the pain of saving and sacrificing, and tried to teach me about money. I think you can make your kids learn to be responsible and still pay for their education, it’s not necessarily a tradeoff…in fact, some of the least fiscally responsible of my friends are the ones that have had to work all their lives, had to get scholarships for college and still emerged in debt. They figure there’s no point to saving money cuz they’ll never get out of debt, or the idea of how much they owe is so daunting that they’d rather just close their eyes to it. No 401k even though the company does a match….your worst nightmare Ramit. I don’t think paying vs not paying for college is the difference between knowing how to manage money vs not.

  5. avatar

    You also have to consider that some prepaid college plans lock the cost of tuition. I don’t know the statistics, but I’m quite sure the cost of college will greatly increase between my child’s infancy and high school graduation. Also, if your child gets a scholarship, it’s not like you’ve lost any money. I still intend to encourage my children to work towards scholarships. Of course, this whole issue feels very much like the idea of life insurance. I never thought it was a remotely good idea to spend money “just in case” something bad happened. And then you have a wife and children and a mortgage… I think having a family really changes your mindset.

  6. avatar
    Don in Sugar Land

    My wife and I faced this not too long ago. We had our first child on Aug. 11th. We are a middle class couple with one income. And that income is being threatened with WFR’s. At any rate we decided to start a savings account for our daughter. We opened an ING Savings account with $5 and every pay period (bi-weekly) we contribute $25 as well as pay our selves $25 each. Our daughter without doing a thing has accumulated $461.43 with the interest rates she is making over $1.50 a month in interest. Time is on her side and I wish my parents would have done something similar for me when I was a child but this is my turn to make a difference. When she gets birthday money and gift money we will drop it into this account as well.

    When my daughter is old enough I hope to teach her what I have learned about finances and cash flow as well as how to obtain assets that will help her be financially free.

    As a parent I want to provide for my child but I want my child to be financially smart as well as have financial freedom.

    By the way, we may be classified middle class but with only 2 debts the house and 1 car that will be paid off soon I feel rich!

    Inspiring Authors that help me get where I am today are:

    Dave Ramsey
    Robert T. Kiyosaki
    Napoleon Hill
    Thomas J. Stanley
    Harry Beckwith
    Ramit Sethi
    Kyle MacDonald

    I know that if I lose my job I am not worried and look forward to the next opportunity that comes my way.

  7. avatar

    Timely post — I was going to put some form of this as a QOTD on my site in August. I’ll be sure to link back to your post.

    My experience is closest to Katie’s above. My parents were probably upper-middle class (what you describe as Group 2), thought college was the best years of their life (in Taiwan), and my brother and I both had our colleges paid for (Northwestern and Caltech, respectively). This is more or less a very common Asian perspective, in my experience.

    I’m also expected to pass on this opportunity and fully pay for my children’s colleges when the time comes. And the corrollary to having had our education paid for is that when my parents are older, we’ll also be able to take care of them because our education allowed us to have good careers.

    It’s just a different perspective than, for example, those of many personal finance bloggers that I’ve read. I’ve read more commonly that people put their children’s education last after every other possible retirement, savings, emergency, house account, etc., and seen others responding that that was the right thing to do, because they didn’t want to have the burden of taking care of their parents when they got older. This seems to be the alternative. I’m not saying one is better, but they come from totally different perspectives.

    While I was growing up, I thought I needed to feel guilty about having had a trust fund put aside for my college, but I realized later that, you know, neither my brother nor I misused our funds or took our education for granted, and I ought to be proud and happy that my parents had thought so far ahead. In addition to the funds, they taught us the financial discipline to go along with having such a privilege.

    During grad school, I worked full-time while completing my full-time MA and later also paid for my MBA with my own funds. I count myself as fortunate for having been able to do this, but the financial discipline my parents instilled me, together with a quality college education certainly played an important role too.

    Certainly, there are students out there with trust funds who misuse them and take their education for granted. And there will be students from marginal situations in life who sacrifice a ton but will ultimately succeed beyond even those who were provided for.

    As usual in personal finance, there’s no one-size-fits-all answer to this because everyone’s situation and values are different. The important thing is to plan ahead with whatever path you choose to take.

  8. avatar
    Duane Gran

    Nearly all advice on the matter correctly posits that a parent should tend to retirement before college savings. This much is certain, and its not a purely selfish motive. Self sufficiency well into life’s journey is a good gift to children.

    As for those who are properly saving for retirement and have the extra funds, there are a variety of motivations. A less spoken about reason is to give grandparents, who might otherwise purchase toys and baubles for Christmas and birthdays, a useful means to help the family. Contributions to a 529 plan aren’t as cool as toys to a kid, but in our land of plenty they are a great tool to deflect well-meaning family from lavishing kids with material goods.

  9. avatar
    Gabe Rosen

    I’m a firm believer in the concept that “them that asks, gets”. I’ll never forget Awards Night at the end of my senior year of high school. They kept calling the same person up to receive scholarship after scholarship until it became a running joke. The joke, however, was on the rest of us. This student, who boasted a middling GPA and mediocre achievement in too many activities, ended up with so much money she had to give some back because her total expenses were covered. No one scholarship was extraordinarily large in itself, but they added up. There was no secret at work, though – she’d simply applied for everything available, and in many cases, competition was slim. I wish I’d followed suit.

    Of course, a lot of this can probably be ascribed to growing up in an affluent area. Nevertheless, so many of us fail to take advantage of available opportunities, even when the personal investment is minimal.

    My plan is to secretly save for my kids’ education, but encourage them to earn as much as they can on their own. A cop-out, I’m sure, but I can always impose new rules later.

  10. avatar

    My family has a pretty simple solution for this, that I will carry on with my children:

    1. You go to a state school.
    2. You pay for it with scholarships, which we have found pretty easy to get.

    I’m not sure how 100% right this is, but we consider that a state school will give you just as good an education as an Ivy League school, for a lot less money.

    And, quite frankly, a lot of studies have shown the same thing.

    And state schools are a lot cheaper and easier to earn scholarships for.

    My own example for Arizona State:

    I managed to get enough scholarships to pay 100% of tuition plus an additional $10,000 a year which covers books, dorm costs, and food.

    I figure my kids will do the same.

  11. avatar

    Another interesting perspective on “Generation Next” and college debt: “Working until the day we die” at

  12. avatar

    Be careful that when you’re asking your kids to pay for some of their education that you don’t start them out in debt. Have them save up through High School rather than take out loans that can cripple them for years after graduation.

  13. avatar

    yeah, so as we’re seeing here, there’s a a lot of other very important side notes to the “how to pay for college” discussion. A child is exactly what you pour into them. Teaching the value of mone, the importance of working and earning money, along with just good morals and values. Money mgmt must be in there. As Katie pointed out, paying for college or not isn’t the determining factor. But they are side notes.

    1> No, saving for your children’s college should not get in the way of retirement savings and it certainly should not get in the way of paying off debts. First become debt free, then fully fund the emergency fund, then start retirement savings, then start college savings. At the worst, the little cherubs can go get a job an apply for every scholorship on the planet and make it happen.

    2> We are planning to pay for my daughter’s college – along with any other children we have in the future. There will be some limits and boundries, but we’ve got a few years to figure that out (she’s 3). There’s no excuse not to pay for at least some of it, unless you don’t care about your child going to college, but we’ll skip that. Socio-Economic status has nothing to do with it. I grew up upper-middle class (both parents have white-collar jobs) and my parents put two kids thru school. They payed for all school and living expenses – extracarricular was up to us. My wife grew up lower-middle class (farmer and a teacher as parents). But they put three kids thru 4 years of school – anything else was on the kids’ ticket. There’s also a great story from, of course, Dave Ramsey, where a mother couldn’t pay for her daughter’s college, and didn’t know what to do. They bought some software that cataloges every available scholorship in the US then shows you which ones you are elegable for. If I remember correctly, of the 100 applications she filled out, 60-70 turned her down. The others said yes to the tune of $36K.

    3> Don’t think that you can’t pay for college because its too expensive. Most state schools are curently $5-6K per semester. Sure that’ll go up in the next 15-20 years and likely faster than inflation. the point is that you should never say “I can’t afford it” if you are driving around a $40+K car, and there’s a lot of those on the road. Also, state schools ARE good-enough for your children. 90% of the jobs out there don’t care about where you went, its what you got when you went there. Pedegrees don’t matter, and that other 10% you don’t want anyways. But if you get on it early, you’ll be able to afford Duke or Harvard.

    And yes, as Don said, having a baby and starting a family will totally change you.

  14. avatar
    Ramit Sethi

    I really, really appreciate everyone’s thoughtful comments on this post.

    I just wanted to share something my parents always told us, which was to try to get into the best school for you, and the money would work itself out. In other words, if you’re good enough to get into [whatever] university, they’ll handle the money. In my experience, this is exactly true. And recent moves by a bunch of great universities have made this even more true.

    This is also why I got so mad when my friends would say things like, “I’m not going to apply to [top school], because even if I got in, I couldn’t afford it.”

  15. avatar

    Luckily for us Aussies, the government provides a very low interest loan system that all university students are able to utilise. It’s called HECS, and your university bill is kept by the government, and a small portion of your income (on a sliding scale anywhere from 1% to 8%, depending on income) automatically takes care of repayments, and that amount is automatically calculated into your income tax.

    That, and the fact that university costs are subsidised and a typical course at a good university will only cost around AUD $3-$8k a year.

    So perhaps another option might be “send your child to university overseas”? Even with the costs involved in travelling and living abroad, and even paying full fees it’s significantly cheaper, and you are able to get the same level of education (perhaps even better in some areas?).

  16. avatar

    Great topic.

    I think there is something to be said for letting a child focus on their education unencumbered by a job.

    Readers should listen to NPR’s interview of Warren Buffett’s granddaughter. Spoiler: He paid for the best education she could get and for nothing else . I like this idea (and I have two kids under 10). He took care of her basic needs and let her earn her own disposable income. It was probably a shift from her pre-college life, but the downside wasn’t the homeless shelter.

    A similar policy is to make a lump sum available that covers tuition, room and board. The child is then responsible for earning merit-based scholarships or part-time income that free up parts of that lump sum for nonessentials.

    Going one step further, make a lump sum available after admissions have been earned. The child then has the option of going to a less expensive school and pocketing the rest, or investing it all in a more expensive school.

    It all comes down to how much financial responsibility an individual child is prepared to accept.

    One last thing: I think student loans are very attractive because of the low interest rates and deferred payments.

  17. avatar
    Scott Elliott

    Someone who went to Stanford should know the incredible lifetime value of a top quality education.

    Teaching responsibility is a great idea, but not if it means forfeiting an opportuntiy like Stanford. Parents should be saving early and shooting for Stanford.

    Here’s an example of why. A kid I know comes from a family that is well off enough to have a second home.The parents believed their kids should pay for school on their own as a financial lesson, so they intentionally never saved a dime for their educations.

    The daughter is a very good student and gets into Notre Dame, but the school is not offering a scholarship. Meanwhile, she gets a full ride offer from a decent state university that is nowhere near the quality of Notre Dame.

    Mom and dad have no cash saved to offer to help her make ND work. So she goes to the state school because it’s free.

    In my view, this is an insane tradeoff, and I am telling you, it happens all the time. Think about how much better that girl’s life chances and earning potential are with a degree from ND! She’s smart and she’ll do fine, some will say, no matter what school. True, but places like ND, Stanford, Harvard let you into an elite club that can open all sorts of doors to will allow you to get the most out of life, and of course earn more.

    Will my kids be Stanford material? I hope so, but who knows. But if they have a chance like the ND girl’s, I don’t want to say to them, “Sorry, I don’t have the cash to make it work.”

    There is no downside to saving for your kids college. But there can be a huge downside to NOT saving. You can cost your children opportunities they deserve.

  18. avatar

    My opinion might change, but I’m leaning towards a reimbursement plan similar to a lot of companies. For example, an A would get paid for 100%, a B would get paid for 80%, C would be 60%. Anything below that and they’re out of luck. I think this can help motivate them to do well. I don’t have any kids yet though, so my thoughts may change. As for me, I got most everything paid for at a state school with scholarships. My parents would help with some expenses, and I would pick up anything that was left. Either way, it’s the kid that decides how they’ll turn out. I’ve had friends that had everything paid for and continually slacked off, and others that worked really hard. Same thing with people paying for it themselves. There’s more to being responsible than having some sort of financial consequence apparently.

  19. avatar

    The psych term you’re looking for is probably the false consensus effect.

    Also, your TypeKey sign-in doesn’t work. 😉

  20. avatar

    My parents told me that I’d get $5,000 a year and the rest I had to earn on my own or from scholarships, so that’s what I did. I liked their approach, because it forced me my senior year in HS to face down the choice of either

    1. Apply like mad for every scholarship I could find


    2. Go to Sac City

    (Oh, and guy in comment #2, USC is a third-rate institution whose overrated football team will be destroyed by Cal this coming season)

  21. avatar
    Sri Siva

    Why dont students consider studying in the midwest or similar places where tuition is less than $6000 a year?

    Is it really worth it sometimes to go to big school names and in the end u may earn just a little more than someone from mom&pop university?

    I have seen millions of times for example in specific fields like IT….it does not matter where u graduate from…..

    My wife graduated from mom&pop university and she makes a nice 6 figure salary. She is only 29 (and been in the job market for 5 years now).

    Now maybe for an MBA, it might be important….but eventually, the mom&pop guy/gal catches up. (dont get me started on the fact that you learn more at an ivy league)

    I had a student who did not know anything when he graduated and within his first year, he was making $80K a year. (plus he was an international student, who have a tougher time finding a job)

    Now for my kid, I think i will send him to a state university which i can easily afford. I rather him have good savings and a degree than an ivy league education + debts.

    I will also buy him a car and a house to start him off (I am from the midwest….houses here are still cheap, around $200K plus).

    My parents did the same for me, and i will repeat the same for my kids.

    My parents live and work in Asia and they still could afford to send all 3 of their kids OVERSEAS for education….and here we are unsure about paying for our kids here in AMERICA.

  22. avatar

    I am not paying for my kids education, whether I have the money or not. I am 19, I am paying my own tuition in cash, no loans, I work my ass off and I can afford it, and I hope my kids will be able to do it too.

  23. avatar

    I was thinking about this too, especially since I’m coming from a not so well off family (very low income) but expect to be very well off in the future myself.

    Right now, it’s a no. I won’t be paying for my kids. Once they can start holding a job, they’ll be working and saving their own money.

    I went to community college to help save on costs before transferring to UCLA. When I started, I was quite shocked to see how many students had their entire education paid for by their parents.. or if they needed anything they just called up daddy for another $1000. It was ridiculous.

    While in school I worked all types of jobs.. research, grading papers, work study, tutoring. This in addition to scholarships and grants was sufficient.

    Also, I don’t think working will hinder a student’s ability to participate in extracurriculars. It didn’t stop me, but it did keep me busy. You don’t want your kids to have free time… they’ll be on Facebook all day =P.

    Now graduate school is another concern. I’ll be starting at Stanford and holy crap.. it’s expensive. Still no help from the parental units, instead I’m deferring a quarter to work and save up – and then taking out loans.

    Of course, it was my choice to attend a private vs a state school. Same situation that many kids run into.. free $$ at state school, or no money at expensive tier 1. I really hope this “investment” pays off eventhough it seems many of you are saying that industry doesn’t care. I beg to differ from my limited experience so far.

  24. avatar

    Kids study often with more motivation and dedication when the education is not presented as a free ride but if they have to “pay” for it themselves – be it through efforts to win scholarships or with their own money like accumulated birthday gifts from grandparents, vacation jobs etc.

    I paid for part of my education and worked through university. You bet that I wanted to get something for my money.

    I would also establish an education fund early in the kid’s life and make family donate to it rather than buying useless birthday and xmas gifts.

    Kids might also start at a state college and, if grades qualify, transfer to a high reputated one after 2 years.

  25. avatar

    My parents put me through college, and it was great to start my professional life free of debt. That allowed me to save up thousands of dollars, even after maxing out my 401k. My wife’s parents on the other hand, despite two very good incomes, spent all their money, forcing my wife to take out massive loans. So as a result, before I can even pay for my children’s education, I have to pay for my wife’s! She’s just lucky she married a “rich” guy.

  26. avatar

    First off, I wouldn’t let the kids know that I planned to pay until the payment actually happened.

    Because if an emergency snuffed out the cash, then what is the kid to do? She’s left with no alternate plans.

    Second, so WHEN do you expect a kid to learn about longer term planning if you take away the opp to save for college? We talk about how the latest generations don’t get delayed gratification. Well, why would they? They’ve never had to even think about the future.

    Third, whether or not to go to college should be a conscious decision (it is a big investment). Do you really want it to come down to “It’s free…might as well go.”

    Fourth, college is an investment. However, it is only an investment for the person fronting the cash. The funder is usually the only one overally concerned about the return too.

    Personally, I lean towards having the kid front the bill and then after she graduates, if the parents so desire, reimbursing for the expense. The best of all worlds.

  27. avatar

    I spent the first two years of college crying over money issues multiple times a week. My mom couldn’t pay for my education, and I couldn’t take out loans for reasons I don’t want to get into here. I had a job making a good amount for a college student, but of course it wasn’t enough.

    I wouldn’t wish that on anyone. It’s easy to say “they can just get a scholarship” but it’s not as easy to actually get one. I was fortunate enough to get a few scholarships (2 during my first two years that didn’t cover nearly enough but helped greatly, and a full ride for the rest of college) I think the full-ride scholarship was a lot of luck (again, long story). I know some brilliant people who applied to every scholarship they heard of and had NO luck or not nearly enough luck.

    My plan is to save, of course, if I can pay all my other bills. It’s not a parent’s responsibility IMO, but I think it’s the decent thing to do. I don’t think a graduate should have to start their life up to their ears in debt or never get a chance to even enjoy their college experience because they’re too busy working all the time and freaking out about money. Of course, some parents can’t help out and that’s understandable. But if they can chip in, it really makes a big difference.

  28. avatar

    This is interesting because my daughter is now a student. She just finished her 1st (of a 3 year course) where we paid for it with the help of Grandma and loans. For next year she found herslef a job/ scholarship(work 2 hours a week for the scholarship) and she is trying to raise money during vacation. She’s a music student, which meant w’ve been paying for her professinal training for years. During the school year I don’t want her to fuss over money. I want her to focus on her studies – to get as much as she can out of the experience so wehn she graduates she will be as employable as possible in a competitive field. BTW she’s studying in Belgium where tuition even for nonresidetns is lower than in American schools. We pay 5500 Euros a year for a school comparable to Julliard.

  29. avatar

    Sean – Its interesting that you refer to your grad school as an investment – which is not inacurate. there are some careers where you won’t ever get above enty-level without a masters. In other cases it will accellerate your pay schedule / carrer track. But here’s how to do the math on this “investment” – what will you be making after graduation vs. what have you paid to get the degree. spending $100k to get your degrees to go into social work, teaching…. ($20-30k per year) yeah, not a good idea. Noble – maybe, smart – no. Some careers just don’t pay well no matter how many letters are after your name.

    Now maybe your industry is ‘snobbish’ about degrees and pedigrees. But don’t assume Big name school = success. yeah, people ooooh and aaahhh over that kind of stuff – “oh, and he went to *Yale*”. But a good employer hires a person, not a piece of paper.

    Also – statistics are showing somewhere around 80% of college grads are not even working in their degree field, do you think they care where they got that degree?

  30. avatar

    I personally think paying for your child’s college education has virtually no bearing on their current/future financial responsibility. I knew from about age 6 that I was going to be responsible for my education, so I worked summers and applied for every scholarship I could find. When I got to college (Washington Univ. in St. Louis, an unnecessarily butt-expensive school) I was floored by how many rich kids went there, but the mentality about payment for their education was very different. I had a friend who felt obligated to study harder than he had in high school because his parents were shelling out serious dough for him to be there, but there were other pieces of snot that fully expected to be catered to for the rest of their miserble, luxury car-laden lives (I swear I’m not bitter). Having to work and worry about money definitely made college a little more difficult for me, but it prepared me for the real world but didn’t appreciably interfere with my studies or my pursuit of fun. I don’t think that college is the ideal environment to teach your kids a financial lesson; it’s better to teach them to be smart about money early on and let them know way up front (early high school) what they can expect from you for school.

    With all that said, I do plan on contributing a fixed amount to my (unborn) kids’ education, but only because I am working to be in a comfortable position to do so–I’m not letting some university bill ruin my early retirement. 🙂

  31. avatar
    Gabe Rosen

    I wanted to address the state-school issue. Obviously, you can get a great education at a state school. It’s important to remember, though, that most schools have decided advantages, including the Ivies Jake dismisses.

    I work with Silicon Valley internet startups, and I have to say, this industry is run in large measure by Stanford grads. It’s by no means exclusive, but for my career purposes it would be simply untrue to say an English degree from a state school would be just as good. In terms of content, sure, but no one should go to school just to go to school.

    Of course, Ivies are more expensive, and the power circle is becoming less exclusive. It all comes down to what you do with the opportunity, whatever it is. I know plenty of folks who never took advantage of what their schools offered, as students or as alumni. But given that it’s about opportunity, I would never restrict my kids’ educational choices at the outset. If it’s unaffordable no matter what, that’s one thing, but no one should be denied the chance to make it work. And, as Ramit proves, those chances are out there.

  32. avatar

    Dude.. I think till today I liked what you said but you ALSO need to learn when to draw the line…that USC thing was a BS .. maybe you also need to learn to respect other people sentiments..


  33. avatar

    I’m not giving my kids a dime. There are compelling arguments here, but I still stick to the opinion that it’s their responsibility and not the parents to finance their education. Others aren’t wrong for doing it; i’m just not doing it for mine. I just graduated from college, and I am on my own. I have massive student loans even with a scholarship. Why not have to worry about money while in college? THAT’S LIFE!!!!! Many argue that students can’t enjoy the college experience this way, but college is not about having fun; it’s about getting an education and learning about the real world. Besides, those student loans have helped me to build my credit. My parents never helped me, but they taught me about financial responsibility early on, and I can’t thank them enough for it.

  34. avatar
    Nathaniel Talbott

    So, I’m a bit weird here – I purposely chose not to go to college, and apprenticed (in software development) instead. I’ve been able to take the years (and money) I might have spent on college and focus them on real-world experience with consulting and entreprenuership. My personal (obviously counter to the prevailing) view is that if you have to have the piece of paper a college education provides, then get it, but otherwise it can be a major waste of money and time.

    “But wait!” you say. “What about the college experience?” Well, I didn’t jump right in to full-time software development after high school. Rather, I spent almost a year working with juvenile delinquents (an experience some might liken to college ;-]). There are lots of different ways to gain the “out of my parent’s house” experience, and my outsiders view says that college is but one of many.

    So what about my kids? Well, first I plan to encourage them to spend a year or two out of high school doing something, preferably something that’s focused on others and not themselves. I’m also going to encourage them to do whatever they need to in high school and afterwards to figure out what they want to do. If that ends up being something that needs the piece of paper, so be it, and I’d like to contribute to their college time. If it doesn’t need the piece of paper, I’d like to take the money I would have contributed to their college education, and instead apply it to setting them up in their chosen profession, be it software development, construction, real estate, whatever. Some of that might be non-college education, some of it might be capital to start an entrepreneurial venture.

    All that to say, I think the perceived need for every kid to go to college is a fallacy, and I want to be flexible with my kids (of which I have 3, btw) and focus on the end goal (success in life) rather than one available means to get there (college).

    Waiting for the tomatos…

  35. avatar

    I’m one of six kids, earned and got scholarships to pay my own way through a state school. I was accepted to Ivy league schools but chose not to go into the kind of debt it would have required. My husband went to the same state school and his parents paid for everything.

    We’ve chosen to save for our kids education. The kids have been told we will match what they earn. They get scholarships? we’ll match them. They save money form a job? We’ll match it. They are lazy and don’t work for good grades or to earn money? They don’t get anything.
    We DO expect them to attend college and do well.

  36. avatar

    I’m declaring a state of emergency on Financial Literacy! The numbers speak for themselves. Last year more students filed for bankruptcy than graduated from college and teens admit to spending 98% of what they make instead of saving it. Our society has created a self-serving, entitled generation that expects more for less.

    In the US, every 7 seconds someone across America drops out of school (that’s over 1 million students every year). Translation—only 53% of all high school seniors graduate from high school and the one third that do graduate do not have the skills to do anything other than minimum wage work. Today the U.S. ranks 24th in the world in math, the average college student graduated with over $19,000 in debt, and the average in credit card debt is $2,700.

    Parents need to prepare their children for the reality ahead and need to lead by example because financial accountability takes years of discipline and hard work. And if you don’t teach your children or grandchildren anything—teach them that. Coming September 1st Money Made Simple. Stay Tuned.

  37. avatar

    When I went to college the first time my parents fitted the bill from start to finish. My program did not allow me to work becasue of the hours of class and the work load involved. I have since graduated and have been working for a while. I have decided to go back to college but this time to a public college rather then going private again. I have worked very little over the past year but I have not asked family to assist. I did not for assistance the first time, but I am very gratefull that they were willing to pay. I have applied for financial aid and will have to work as much as I can to see that tuition, books and supplies are covered over the two years. Aside from school I have other expenses that need to be paid. I know it will be difficult and I will have to work very hard to manage my daily tasks and finances on a regular basis. I understand that my parents are here to offer any assistance that they can provide to me but this is my turn. I know that I can never repay them for the private college that I attanded, which they pay for, but I can at least do this for myself. I believe if one wanrs it bad enough they will find a way. I am finding my way.

  38. avatar

    My parents did their best and I still ended up deeply in debt (thanks to my finance geek husband for changing my perspective to get me out so we can actually put money towards house/retirement!…)

    My 3 strategies/plans for doing it better for my kids…

    1. we do the direct deposit “pay yourself first” of $50 week for each kid into a 529.

    2. we do the Little Grad ( program so we get rebates for practically all our online shopping (over $300 in 9 mos, so much better than upomise…)

    3. kids will be strongly encouraged to do the scholorship search/apply, take the year off before college and work real world, and find programs for debt forgiveness… peace corp, etc.

    #3 is all stuff thats out of my control… mostly, but I want it noted for the record!


  39. avatar

    Be VERY careful with what your suggesting. I am the product of a parent who believed that since she financed all of her college education on loans I could too. By my second year of school she was refusing to pay. I recieved a 7k scholarship and is still came nowhere close to covering tuition. Within one semester of my sophmore year, I had to drop out. I even tried attending a school closer to home that cost half as much…only to have the same thing happen within one semester of my repeat freshman year. Now I have debt from to schools, two sets of transcripts I cant acess, and am praying she will at least stop being selfish long enough for me to get through cosmetology school.

    And parents keep in mind that the more money you make, the more of a hole you are digging for your kids. According to the government you do not have the option not to pay for their education. Until they turn 24 your income is considered and they will face an uphill battle getting aid to cover monies that the government believes you are able to pay (notice I say “are able” and not “are willing”).

  40. avatar

    um its so selfish for parents to expect their children to do well in life aka college educated, good job , but not have had their parents help getting through college. people should remember to be kind to their children because even though they saved a few thousand bucks not contributing to their childs education for retirement purposes, your children are the ones who you lean on in old age. just remember that. plus , im my opinion, i would rather just get a job and say screw school rather than work , live at home and go to college ( can u tell im bitter) get out of school at thirty, and then be a super old mom, because unlike men, women have a shelf life of about 35 years before we shrivel up and become sterile so yeah thats my opinion

  41. avatar

    Whether or not you should pay for college is going to depend partially on whether the gov’t/college expects you to pay. I think that at the least I would pay this much.

    If a kid gets in to Harvard and the parent makes $100K then Harvard will assume that the parent can contribute say $20K a year and will give an aid package accordingly.

    Say the cost of Harvard is $50K, and the parents refuse to pay.

    If the student gets extra outside scholarships, then they are going to have to add up to more than $30K to affect whether or not they have to take out loans of $20K a year.

  42. avatar

    Hmmm I have very mixed feelings on this subject. I do feel that a child should understand the value of a dollar. But…. well I do feel a bit embittered that my parents didn’t help me not one bit.

    I chose a fairly intense program (Architecture) worked during my entire education. I lived on my own(with roomates). I received grants and loans. And I came out in serious debt! (And I went to a State School as a resident)

    I feel like I’m at a serious disadvantage. I’m just now starting to pay of my loans with not much hope for the future. I would really like to go to Grad School but can’t help thinking it a waste of my already non existant funds. It has also made me think twice about my choice of career even though I very much enjoy what I do I can’t help but think why didn’t I go for something that made more money. At least then I’d have a hope to pay off those loans. Or the other many things on the horizon.

    Wedding, Home (every architects dream is design their own place), my beat up car is going to give out on me soon, the cost of keeping up with the industry(computer software etc), I wouldn’t even think about having kids, I’m just now beginning to be able to save for the future retirement. And my mother keeps dropping hints how she could really live with me… ‘you know in the back in a “mother in-law”

    Aaah are you kidding mom? I don’t even own a house.

    You can see my frustration no. I think a little help goes a long way.

  43. avatar

    nice blog..,and interesting..every one be careful to pay for children education,you don’t start them with debt. Have them save up through High School rather than take out loans.

  44. avatar

    Interesting topic…My husband and I recently had this conversation. While we had talked about everything prior to getting married, we somehow never talked out our philosophy regarding this issue. It came up recently and we were on different sides. I am a firm supporter of paying for 4 years of my child’s education. Yes, I expect them to seek out other money (scholarships, jobs, etc.) also. My husband didn’t plan on paying for them at all. He says that we managed without parental support and they should also. Sure we manage…But with 14 years of schooling between the two of us, we are saddled with a 1600 a month bill-twice our mortgage! It stresses me out daily! I don’t want my child starting off on that foot…Also, as a school counselor, don’t count on scholarships being the primary source of college income anymore. The money just isn’t there with the huge competiveness, and with larger numbers of students going to college. Local scholarships are typically much easier to get but those are for small amounts…

  45. avatar

    I just found your website, and I’ve read through a lot of the articles, but this one caught my eye.

    I’m in my final year as an undergraduate, and the last year I’ve had to pay for by myself because of rising tuition. Before that, I was lucky enough for my great grand parents to have given me 40,000 dollars worth of savings bonds, which was able to take care of tuition & living for three years. In the third year, when it was clear the money wasn’t going to make it, I got a job at the same time as moving into an apartment.

    These last two years have been really tough. It’s taught me a lot of things. First, I should make it very clear, that the government will not take care of enough to pay for outside expenses. To be able to afford my apartment & living, I had to work at least 30 hrs a week. Then there was my 15 (more or less) hours of school work. In the end, my grades didn’t suffer, but I had no life. The last six months, I only got 225 dollars from the govt after tuition was paid. It barely covered my books. Then, I had a car accident, that was my fault (don’t drive tired). It completely wiped out my savings – insurance covers repairs, but it doesn’t cover tickets. I had to pay for it on credit, because I just didn’t have the money.

    Anyway, it all worked out, as I am sitting in England on study abroad right now. I decided that the 10,000 debt I’ll have to pay off later is worth it. (plus 5000, for my last year of school). And really, that’s not near as bad as most of my peers.

    I’m not really sure how I did it, sometimes I almost wanted to break down. I’ve pretty much decided not to go to grad school, it just doesn’t seem worth it. I have so much respect for people who were worse off than I am and manage to pull it off.

    In the end, it did teach me the value of money. Sort of. I didn’t learn about saving, because I wanted every dollar going to living expenses. I think I could have learned the lesson a bit easier. It was much more important to learn about managing the apartment and dealing with companies and the like. It also helped me learn how to balance time. The same thing could have been done with an extracurricular activity.

    Anyway, when I have kids, I’m definitely going to try to pay for their education. I don’t think debt builds character. However, I won’t give them loads of extra money or presents. This really aggravates me. Partially because I’m raw with envy, but some peoples parents are training their children to be constantly living from hand to mouth. Or just living from parent. Like, if someone pays for their whole kids college, their apartment, their food, and THEN also bails them out when they run out of money and buys them things randomly, this is irresponsible. (yes, I know someone like this).

    I would insist my kids live in the dorm, or if they don’t want to, then they would have to understand that they would have to pay for the summer months away from home. Basically, if they don’t want to go the cheapest way of living, they can pay for it. I wouldn’t give them any kind of spending allowance either. You don’t really need that in college. Eat ramen. Get a job.

    A lot of people my age seem to be incredibly lazy and lacking any kind of direction or drive. They just want to play video games all day. And really, when you see how some of their parents indulge this, why not? Anyway, that’s the end of my bitter rant. Back to relaxing in England!

  46. avatar

    This is my plan…if I am able to pay for my kids’ college AFTER I take care of myself, I won’t tell them that beforehand. That way, they will learn the responsibility of paying for something themselves, and will appreciate it more because it is coming out of their pockets, not mine. AFTER they graduate, I will give them the money I would have used to pay for their tuition.

    This gives me another 4 or 5 years to save and earn interest, promotes incentive to do well on their part (since they are paying for it), and rewards them for completion of a goal on their own. And the best part is, if they drop out, then I’ll have a nice little pile of money for myself!

  47. avatar

    I joined the Marine Corps in order to pay for College. Seemed kind of harsh at the time, but I don’t regret a minute of it.

  48. avatar
    David Lippman

    Good post, Ramit. I have a 15 year old daughter who will be a h.s. sophomore next year. I think one of the most important tasks for a family to complete is to determine their Estimated Family Contribution (EFC). FAFSA uses the EFC to determine roughly how much a school should charge a family for college. Here is a link to an EFC chart from 2013. Http://

    Basically, if your family income is $165,000 and you have one child you are expected to be able to afford just under $40,000 dollars. A year. If this is figured out before the child enrolled it can help the family budget and determine what is or what is not affordable (out of state vs in state etc…). The EFC is primarily based on income, not necessarily on wealth. Knowing what the number is likely to be can help with planning and saving imho.

  49. avatar
    Danta's import BRUIDSACCESSOIRES

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