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

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

Post by dropoutretire » Sat Mar 18, 2017 10:10 pm

I saw an Oregon college savings tax free plan commercial on tv last night, and they said that you can save up to $4620 a year tax free per year. So I thought let's throw that $4620 into a compounding interest rate calculator for the age of 1 to 18 and it came up to $183,686.10. I thought geez that sounds like enough for a 1OO % debt free house at the age of 18. We in America do everything the hard way with all of the college BS. LOL. I mean holy crap just think about it, your 18 year old could be 1OO % debt free for life and even better, rent out a couple of rooms to the less fortunate everyday average people !
:)

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Eureka
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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 Eureka » Sun Mar 19, 2017 2:28 am

Why not just give the money to the kids and let them decide how to make best use of it?

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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 James_0011 » Sun Mar 19, 2017 4:35 am

What if the kid doesn't want a house?

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Sclass
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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 Sclass » Sun Mar 19, 2017 7:48 am

Because ignorance is the pits.

I've thought about this issue for my young relatives. I figured instead of spending $250k on tuition why not invest it (I was thinking about stocks rather than housing but housing can work for the example) for them and then they have a big boost towards early retirement.

There are a number of issues with this approach.

What if they're so ignorant at age 22 that they cash out the investment? I've been around long enough to see this happen a few times. The kids were left in a situation where they had no degree and no money. Worst, they had no work ethic or hustle because they'd been gifted. They did however feel entitled and too good to toil for survival. A bad place.

What if college is about more than money? Meeting a significant other who isn't too feral? (My first love growing up in LA has four kids and grand kids now...but she is smart enough to use Google to find me :o ). Sitting in the stacks and just reading your eyeballs out for fun? Late night dorm discussions? Learning that History Channel or Myth Busters isn't quality information?

I'm not a big fan of working in the corporate world but I could say it was an educational experience. I wouldn't know the same things I know now had I not gone there. They wouldn't have opened the gates if I had no degrees.

I have a bunch of friends who made it through the trades. Some were not even educated tradesmen. They just learned enough to start some kind of service business and built it up. But these guys have a particular kind of ignorance that comes from the school of hard knocks. Their understanding of how the world works is far too CNN, Fox and History Channel. It drives me nuts arguing the scientific method against the Mythbusters method. Don't get me wrong, these pals are smart, and own multimillion dollar businesses. But they have a form of smart ignorance. I'm glad I don't have it.

Hey you don't know what you don't know.

I've often asked myself if I just had the money wouldn't it be the same for me at this point in time. No. Unfortunately not. It's path dependent and irreversible.

What if I don't want to be like you?

College educated people have their own kind of ignorance. But in my mind it is a good compromise between ingnorance and intellectual indoctrination.

Edit - I do appreciate the point of the OP about the cost of college. It is awfully expensive and makes me raise an eyebrow when I see the ROI in some cases.

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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 » Sun Mar 19, 2017 9:09 am

Gifting like this teaches people to be poor:

https://en.m.wikipedia.org/wiki/The_Mil ... tient_Care

IMO dealing with student loan debt and rent drove me to learn how money works.

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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 » Sun Mar 19, 2017 9:51 am

Giving a young adult a pile of money makes no sense unless you have trained them to manage it. Even then, I am doubtful that a majority would be capable of handling it on their own. Better they screw up with smaller amounts of money first.

And an 18-year old not pursuing an education should probably stay living at home until he/she is making enough of an income to support his/herself.

The chip on your shoulder about college educated people is showing, d-o-r. Along with a heavy dose of survivorship bias.

As for the Oregon plan, which I assume is a 529, it makes sense if two things are true: (1) you are an OR resident and make a decent income and therefore are paying the 9% or 9.9% marginal rate in OR; and (2) there is a reasonably high probability that at least one of your offspring or some other relation (or even yourself!) is likely to be able to use the money for educational expenses in the future. The strange thing about 529s is that they are transferable to other beneficiaries -- who may not even be born yet right now -- and there are some other ways of getting the money out in special circumstance situations. But its best to keep these things a secret even from the intended beneficiaries. Then you can decide at a later date whether you think the particular educational venture and intended beneficiary is worth funding.

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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 » Sun Mar 19, 2017 11:25 am

Eureka wrote:Why not just give the money to the kids and let them decide how to make best use of it?
Because kids lack life experience and knowledge of how things work in general. I think that if you teach your kids from day one about finances that they won't even have a use for college. I would error on the side of giving them a 1OO % debt free head start in life but brainwashing them in the right direction from the age of 2 Im already doing that with my 2.5 year old grand daughter and this is the 1st video that I am brainwashing her with. Enjoy. https://youtu.be/9E_L6caihqA

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 » Sun Mar 19, 2017 11:27 am

James_0011 wrote:What if the kid doesn't want a house?
But most do want a house. lol Heck maybe they might want to travel the world instead constantly.

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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 » Sun Mar 19, 2017 11:35 am

[quote="Sclass

Hey thanks so much for the input and I totally agree with you on so many parts. I have been teaching and grilling my kids about living a 1OO % debt free life style for all of their lives. My kids are light years ahead of their peers financially by light years. It boils down to we as parents need to live by example and teach teach teach and drive our kids nuts to where they whine about too much teachings. I always laugh because I know that I drove my kids nuts and they always act like they will rebel against my teachings, but I am stuck in their sub subconscience and guess what they have no car payments and both are buying houses. But the houses they are knocking out the debt on. I really enjoyed reading your response. GOOD JOB !

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 » Sun Mar 19, 2017 11:37 am

Scott 2 wrote:Gifting like this teaches people to be poor:

https://en.m.wikipedia.org/wiki/The_Mil ... tient_Care

IMO dealing with student loan debt and rent drove me to learn how money works.
Read some of my other relies. I wouldn't just give them a debt free house without brainwashing them from day one about finances.

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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 » Sun Mar 19, 2017 11:49 am

Dragline wrote:Giving a young adult a pile of money makes no sense unless you have trained them to manage it. Even then, I am doubtful that a majority would be capable of handling it on their own. Better they screw up with smaller amounts of money first.

And an 18-year old not pursuing an education should probably stay living at home until he/she is making enough of an income to support his/herself.

The chip on your shoulder about college educated people is showing, d-o-r. Along with a heavy dose of survivorship bias.

As for the Oregon plan, which I assume is a 529, it makes sense if two things are true: (1) you are an OR resident and make a decent income and therefore are paying the 9% or 9.9% marginal rate in OR; and (2) there is a reasonably high probability that at least one of your offspring or some other relation (or even yourself!) is likely to be able to use the money for educational expenses in the future. The strange thing about 529s is that they are transferable to other beneficiaries -- who may not even be born yet right now -- and there are some other ways of getting the money out in special circumstance situations. But its best to keep these things a secret even from the intended beneficiaries. Then you can decide at a later date whether you think the particular educational venture and intended beneficiary is worth funding.
When I say to dropout and retire early, I am speaking from my own personal life experiences. I just think that there is a huge enormous gynormous excessive problem with public education and the Trillion dollar debt bubble is proof of that. 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. I do agree with you 1OO % to keep the savings as a secret due to the fact that my own kid maybe an idiot. Some kids are born stupid and lack discipline and trust me if thats the case I would simply use the money for my wife and I to travel the world even more often. lol

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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 » Sun Mar 19, 2017 3:47 pm

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.

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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 » Sun Mar 19, 2017 4:47 pm

Have you ever heard of a Mustachian ? Or have you been to mrmoneymustache.com ?

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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 Kriegsspiel » Sun Mar 19, 2017 5:07 pm

MMM? That guy who was able to move like 6 times in the 8 years after he graduated college to follow better jobs because he wasn't anchored down by a house, before finally settling down when he was about to retire?

I may have.

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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 jacob » Sun Mar 19, 2017 5:39 pm

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.

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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 George the original one » Sun Mar 19, 2017 5:48 pm

My sister would have squandered the house regardless of whether it was in the form of a roof over her head, college tuition, or a lump sum of money. Come to think of it, I believe she has managed to squander each of those things, possibly several times.

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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 » Sun Mar 19, 2017 7:33 pm

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.

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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 » Sun Mar 19, 2017 8:32 pm

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.

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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 » Sun Mar 19, 2017 8:36 pm

Kriegsspiel wrote:MMM? That guy who was able to move like 6 times in the 8 years after he graduated college to follow better jobs because he wasn't anchored down by a house, before finally settling down when he was about to retire?

I may have.
Sure thats the path that he took, but you can tell that he strongly questions the path that he took and questions the whole college thing in general if your read this article http://www.mrmoneymustache.com/2013/07/ ... ee-part-1/ Also real estate doesn't tie you down if you turn your last house into a self managed Clean and Sober house instead of a normal rental. Its like having a free property manager that cares about each other helping each other get better as they pay you rent and they all drug test each other. Nice to meet you though. :)

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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 » Sun Mar 19, 2017 8:39 pm

George the original one wrote:My sister would have squandered the house regardless of whether it was in the form of a roof over her head, college tuition, or a lump sum of money. Come to think of it, I believe she has managed to squander each of those things, possibly several times.
Sounds like how some of my siblings would take a 1OO% free house. You have to be careful of whether or not to give your kid a free house. I just think that its better to give them that than free college money because the odds of success are much higher in my opinion with the debt free house because the kid can afford to work for minimum wage and still have a stress free life. :)

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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 » Sun Mar 19, 2017 8:42 pm

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 » Sun Mar 19, 2017 8:44 pm

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

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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 » Sun Mar 19, 2017 9:30 pm

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.

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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 » Sun Mar 19, 2017 10:33 pm

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 » Mon Mar 20, 2017 12:43 am

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 !

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