Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Anything to do with the traditional world of get a degree, get a job as well as its alternatives
dropoutretire
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by dropoutretire »

Dragline wrote:
dropoutretire wrote:Have you ever heard of a Mustachian ? Or have you been to mrmoneymustache.com ?
Well, yes. :D

A very good example of what I was talking about. Went to college that didn't cost too much and got a good credential. Got a good job with good pay off the bat and banked most of it. Essentially followed an ERE-type plan and "retired" early. Enjoys small construction projects.

But I think the most interesting part of his story is how he got too involved in real estate and realized it was a waste of his time and money, cut his losses and moved on. Have you heard that part? :lol:

Now with the success of the blog, he has essentially become an MND, trying out fancy new cars and investment vehicles. Let me know if you recognize that acronym.
Yes I read about his real estate losses. Im going 1OO% debt free no leverage ever again in life. In about 5 to 6 years I will start buying up houses and starting up more and more clean and sober houses to help people get better, but I will buy the houses 1OO% mortgage debt free with cash. I think that leverage isn't worth it. :)

dropoutretire
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by dropoutretire »

Dragline wrote:
dropoutretire wrote: The purpose of my question was should we as my headline says. " Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ? " I mean if you save up for a kids college and give them all of that money to use for college, isn't that basically giving them a lump some all at once ? Now ask yourself isn't the majority of the purpose of college to feed you face with food and a roof over your head later in life ? I am simply saying why not elevate the house problem for your kid right off the bat so that they lead a more less stressed life with a mortgage or rent. I am all for college if there is a good rate of return on your money if you dont have a house to give your kid but as far as my question about giving a kid college money vs. a house, the debt free house is a guarantee far more than a college education.
To question one, the answer is "no" because you still control the money and they never actually touch it.

To question two, the economic purpose of college (or trade school, etc.) is to increase both future earning power and work possibilities by acquiring the credentials (degrees, certifications) that may be necessary to open certain doors. The problem most people face is that they overpay for credentials that are not very useful and do not weigh the value of those credentials in the marketplace before purchasing them. A computer science degree from your state school is probably a bargain. A degree in psychology or medieval history from an expensive but relatively low ranked private school is probably a folly.

As for the last assertion, that is also incorrect IMO. A debt-free house is probably not as valuable as a college education if you look at the aggregate statistics, but YMMV. The problem with a house itself it that it does not earn any income if you are not renting it and simply causes you to incur expenses in utilities, repairs and taxes. Nor is it portable like an education/credential. In fact, in most circumstances, you would be better off with the cash than the house.
By the way the reason that a 1OO % debt free house is far better than a college education is because when you dont have bills you dont need to chase making money nearly as hard. When your debt free you can afford to work at walmart and theirs a million low wage jobs out there to choose from. lol

Dragline
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by Dragline »

No, you don't get it. If you own a house and live in it, you have to pay taxes on it and upkeep to maintain it. It's an expense, not an asset. A job at Walmart might not be enough to pay for it, depending on the house. Again, unless you have a lot of other assets or income, owning a house just to live in does not make much sense other than in comparison to what your rental/other arrangement alternatives might be. There is nothing magical about owning a house per se.

Scott 2
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by Scott 2 »

I've observed the other side of the gifting - a parent using it to establish or maintain dominance over their adult child. Especially with a house, it's not pretty.

I've spoken with several Uber and cab drivers who were doing it specifically for extra money so their kids could graduate college debt free. It really sounded like the kids didn't truly understand the value or appreciate the sacrifice.

I' guess I'm a scrooge, I don't like gifts. I would feel very uncomfortable taking so much from my parents. It's their wealth, they earned it, and I'd want them to enjoy it, or give it to those with real need.

dropout

Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by dropout »

Dragline wrote:No, you don't get it. If you own a house and live in it, you have to pay taxes on it and upkeep to maintain it. It's an expense, not an asset. A job at Walmart might not be enough to pay for it, depending on the house. Again, unless you have a lot of other assets or income, owning a house just to live in does not make much sense other than in comparison to what your rental/other arrangement alternatives might be. There is nothing magical about owning a house per se.
Your joking right ? Im sorry but your way way way off on this one, who knows maybe your baiting me in for an argument. If you own a house you dont have a house payment and you dont have to pay rent some where and your property taxes and insurance are about $4000 a year. lol I feel stupid even arguing this. Are you serious ? Of course you aren't. This is common sense. LOL !

dropout

Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by dropout »

Scott 2 wrote:I've observed the other side of the gifting - a parent using it to establish or maintain dominance over their adult child. Especially with a house, it's not pretty.

I've spoken with several Uber and cab drivers who were doing it specifically for extra money so their kids could graduate college debt free. It really sounded like the kids didn't truly understand the value or appreciate the sacrifice.

I' guess I'm a scrooge, I don't like gifts. I would feel very uncomfortable taking so much from my parents. It's their wealth, they earned it, and I'd want them to enjoy it, or give it to those with real need.
I would feel zero guilt taking a free house from my parents because I would do the same for my kids in the future. lol

rube
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by rube »

In the light of the web of goals, ere-style, I do not think it is one or the other.

I would say, year 1 you can build the house together with your kid, learning the kid a trade or at least good DIY'ING. Then he can learn how to rent it out and use that income to fund his schooling in a much cheaper way then what seems to be normal for the USA. The kid can go to Europe for example. He will be able to live in a different country (learn a different culture/language) and can study. If the kid works a bit on the side, together with the rental income the study can be paid from it, no debt when the kid graduate.

Then after some years the result is the kid has learned some good DIY'ing, knows how to manage a rental out of state (business), learned another language, gained life experience by living abroad, and graduate. And still has the rental where you paid for.
This seems for me a much better yield then giving a house alone.

It is like (A) giving somebody a freezer full of fish (costing electricity, space) (compare to giving a house) which can be kept or sold but it is not yielding money, it is costing money (taxes, upkeep etc.).
Or (B) giving him a fishing rod = able to catch fish when needed. Compare to pay for an education and make sure the kid can take care of himself by earning money.
Or (C) learn the person how to make a fishing rod, learn how to use it and to sell fishing rods/fish/fishing trips, just what the kid like (ere style, web of goals, tapping water or money when needed and in a preferred way).

Besides, there is more to an education (which does not always need to be formalized) then a monetary yield. FI is not the endpoint, it is just a major milestone. An education can be a valuable part for self developing.

dropoutretire
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by dropoutretire »

Dont get me wrong, I am all for educating ones self. I just dont agree with paying one single penny for it. Go to the college of YouTube ! ITS FREE !!!! Minus the internet bill of course.

Ydobon
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by Ydobon »

Unfortunately you get what you pay for sometimes :lol:

dropoutretire
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by dropoutretire »

Your exactly right that you do get what you pay for and the 1.4 TRILLION DOLLAR student loan debt bubble is proof of that. I keep looking all over YOUTUBE for a DEBT BUBBLE and I cannot find one. People keep coming and going to youtube for free, lol. If I want to repair my own furnace I go to YOUTUBE and type in the problem and walla I figure it out in about 20 minutes for 100% free. I sure as hell wouldn't go to college to furnace tech school for 4 years. Youtube is to college what Amazon is to the big box stores or what Facebook was to myspace or what the internet was to the book stores. You will see in the that youtube will crush most worthless college courses out there.

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jennypenny
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by jennypenny »

I don't want to argue that one should overpay for college because there are many paths to success that don't include an expensive private college. That said, YouTube isn't college. If you want to be a school teacher, accountant, lawyer, research scientist, or work in a healthcare profession (just to name a few) you won't get the credentials you need watching YouTube.

The other point I'd make is that I can see why it's tempting to buy a child a house for $100K instead of spending it on college. It would reduce their housing costs to maybe $5-7K/year (taxes, utilities, maintenance). But if they worked at Walmart, their housing costs would still be a fairly large percentage of their take-home pay, even owning the house outright. If that same kid used the $100K to get a marketable degree (easily done with that much), they would end up earning a lot more than a Walmart employee. In a few years they could save up the $100K again to buy a house, but at that point the recurring housing costs would only be a small percentage of their take-home pay. If they waited a little longer to make sure they had a decent kitty saved up as well, it would generate enough income to pay their recurring housing costs. That would leave them with a paid-off house, no need to work, and a skill set/degree they could use to generate decent income in the future if needed.

Have you read ERE yet? If not, you might find the wiki useful.
Last edited by jennypenny on Wed Mar 22, 2017 6:38 am, edited 1 time in total.

Dragline
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by Dragline »

dropout wrote:
Dragline wrote:No, you don't get it. If you own a house and live in it, you have to pay taxes on it and upkeep to maintain it. It's an expense, not an asset. A job at Walmart might not be enough to pay for it, depending on the house. Again, unless you have a lot of other assets or income, owning a house just to live in does not make much sense other than in comparison to what your rental/other arrangement alternatives might be. There is nothing magical about owning a house per se.
Your joking right ? Im sorry but your way way way off on this one, who knows maybe your baiting me in for an argument. If you own a house you dont have a house payment and you dont have to pay rent some where and your property taxes and insurance are about $4000 a year. lol I feel stupid even arguing this. Are you serious ? Of course you aren't. This is common sense. LOL !
No, it makes very little sense. It might make some sense if the plan was that the 18-year old would live at home and rent the property or rent out rooms and be able to make some income off of it. Otherwise its just an expensive gift that teaches nothing and ties the individual to a location that might not be advantageous. And you forgot maintenance costs in your calculation. You have not done the math and have not realistically compared the alternatives. Whether you should feel stupid or not -- that is up to you; I would characterize the notion as "uninformed."

For a thought experiment, consider what MMM's alternative life would have been like if he bought himself a house and lived in it at 18 and worked at Walmart instead of getting a degree in computer science and moving to where the jobs were. He would have never been able to move to the U.S., would have never met his spouse, would not have been able to become financially independent in 10 years, and would not have become MMM. The math just does not work. The math tells you that owning an income sucking "asset" that you have no experience managing at age 18 is just a bad choice, given the other available alternatives.

The other concept that you do not appear to grasp is that the economic value of college (let's just assume there is no other value to college for the purpose of this discussion) is not in anything you learn there in particular -- its in the credential(s) you receive and the connections you make to potential employers and others. These credentials and connections are not available on YouTube. The nuance is that not all of these credentials and connections are equally valuable, even though they may cost similar amounts and require similar efforts to obtain. Again, MMM's example is instructive. He paid relatively low for a highly valued credential and identified and qualified for lucrative job-opportunities while in school. Of course, someone can just as easily (or even more easily) overpay for a credential that is not very valuable and fail to make connections. But those are choices that can be avoided with a little due diligence.

@rube -- Did somebody just say "DO BOTH"? ;-)

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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by rube »

+1 for JP and Dragline.

And ehm yes unintentionally I probably have said 'do both' :lol:

vezkor
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by vezkor »

dropoutretire wrote:
jacob wrote:Hehe, that "Have you heard of that MMM guy?" happens to me from time to time IRL. I get a kick out of it when it happens.
My friends say that I have MMM's twin brain. LOL. Are you the owner guy of this site ? Pretty cool site that you have if thats you.
@dropoutretire it is very apparent you are new here. Please read this post:

http://www.mrmoneymustache.com/2011/05/ ... t-extreme/

and then this post (note the date of publication):

http://www.mrmoneymustache.com/2011/12/ ... ent-torch/

and please please please keep in mind that if dragline tells you that a house is not an asset because it consumes money regularly and does not produce an income for you to live on: He is correct.

These forums are a fantastic place to take in a massive amount of information. Almost everybody here is aware of Pete Adeney and they tend to consider MMM as the more optimistic and consumerist-friendly version of what's going on here (pessimistic/realistic/doomsday prepper extreme). Not bashing anybody because I personally love MMM AND ERE, just trying to share perspective.

vezkor
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by vezkor »

Also one of my favorites since it's on topic for the moment:

http://jlcollinsnh.com/2013/05/29/why-y ... nvestment/

The links provided within JL Collins article are also pretty good. Remember that the single most important factor with these decisions is almost always going to be price.

Fish
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by Fish »

@Dragline/others: I'm amused that you all would take such a nuanced position on homeownership. It's a simple proposition. All else equal, would you rather own your residence free and clear or not? Unless the house is due for major maintenance like a roof replacement, why isn't this a clear-cut and resounding yes? Why pay the cost of capital to your landlord or bank?

Sure, the answer might be different if offered cash or some other inducement if you don't take the house. I understand the arguments about a primary residence being a liability if you consider expenses and ignore imputed rent. You're right at that level. @dropout's not interested in debating those details. But you could also meet him where he is and acknowledge he still has a point.

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jennypenny
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by jennypenny »

Fish wrote:@Dragline/others: I'm amused that you all would take such a nuanced position on homeownership. It's a simple proposition. All else equal, would you rather own your residence free and clear or not?
But the question wasn't asked that way. Homeownership was compared to obtaining a college degree. I'd argue that the costs of homeownership, even without a mortgage, are too great if a person will have a limited income and has limited experience maintaining a home. It would also lock them into that situation at a time when they should be free to pursue any opportunities that come their way.

Fish
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by Fish »

I would question the assumption that not going to college necessarily means working a low-income job. Rather, owning your house debt-free means you have the ability to cover expenses with minimum-wage work. Just like with ERE. The point about freedom of location is correct though. Although you could always rent out or sell the house when other opportunities come along, that's a situation where cash might be preferred. And college might be king in a bleak future where everything gets confiscated except your brain. :o :?

dropoutretire
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by dropoutretire »

[quote="Dragline"

Connections found in college eh ? I found massive connections in the working world while getting paid for every single hour and paid overtime after 8 hours also. Sure connections after connections with more nonsensical spend aholics making ZERO lol, I agree to disagree. I retired at 39 and knowing what I know now I could have easily done it by the age of 28 !!!! LOL !!!!!
Last edited by dropoutretire on Tue Mar 21, 2017 10:44 pm, edited 1 time in total.

dropoutretire
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Re: Saving up for your kids college from day 1 VS. just buying them a 1OO % debt free house ?

Post by dropoutretire »

Fish wrote:I would question the assumption that not going to college necessarily means working a low-income job. Rather, owning your house debt-free means you have the ability to cover expenses with minimum-wage work. Just like with ERE. The point about freedom of location is correct though. Although you could always rent out or sell the house when other opportunities come along, that's a situation where cash might be preferred. And college might be king in a bleak future where everything gets confiscated except your brain. :o :?
I LOVE IT !!!!! You have light years common sense beyond belief !!!! YOU SEE THINGS EXTREMELY CLEARLY and you over think nothing. I think that most people have analysis of paralysis, BUT NOT YOU !!!!

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