Would you give your kids money for college or life?

How to explain ERE, arranging family matters
pukingRainbows
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Re: Would you give your kids money for college or life?

Post by pukingRainbows »

@halfmoon - Thank you so much for sharing your experience. I'm at a loss as to what to say to someone who has faced such difficulty and struggled to overcome it. It's really an amazing feat. Thank you for your hard-earned perspective.

halfmoon
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Re: Would you give your kids money for college or life?

Post by halfmoon »

@pukingRainbows, thank you. I feel for the pain my stepson has endured being addicted, homeless, jailed and beaten -- however largely self-inflicted it may have been. It's hard to describe his palpable relief at having a home of his own, and I'm grateful that living frugally has enabled us to provide that. This was my motivation for telling the story, despite the risk of oversharing. As @jennypenny pointed out, one of the potential benefits of an ERE lifestyle is being able to make a difference in others' lives. What remains is to decide on the form and timing of assistance; hence the original subject of this thread.

Scott 2
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Re: Would you give your kids money for college or life?

Post by Scott 2 »

@halfmoon - your story makes a great reminder about the importance of catering the approach to the individual. Some people are dealt a much more difficult hand than others, and it's easy to lose sight of that. Caring for your step son sounds like a real challenge, he's fortunate to have your help.I can only imagine finding the right path with those problems has been incredibly trying.

halfmoon
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Re: Would you give your kids money for college or life?

Post by halfmoon »

@Scott 2, I somehow missed this comment back when you wrote it; thank you for the thoughts. It's been trying for all involved, but I'm happy to say that since I wrote my first post, DS has found a job he really likes and can comfortably perform. His boss likes him, and it's close enough to come home at lunch and see his dog. We have our fingers crossed.

bostonimproper
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Re: Would you give your kids money for college or life?

Post by bostonimproper »

Reviving this thread to see what the newer slate of EREr parents are doing in terms of college savings.

DH and I have been discussing this lately with the baby on the way. I’m personally in favor of funding up to full tuition/room/board/etc for our in-state flagship. In our case, that’d be UMass Amherst, which is a great school. We’d let our kids keep the extra if they end up with enough scholarships, etc., or require them to self-fund/acquire loans if there is a gap, e.g. if they go to private, out-of-state, or grad school. I also would be fine if they decided to skip college and go the trades/entrepreneurial route and used the money to buy a home, invest, or build a business. [Obviously, may need to tune the actual parameters based on the real temperaments of these hypothetical children.]

In terms of our own educational opportunities:
  • I went to an Ivy undergrad. My parents contributed $0 because we were low income and I got 100% need-based grants. I had a work study portion that I had to contribute to, plus taxes I had to pay on the non-tuition part of my grants, which amounted to ~$5-7k/year that I mostly paid through part time jobs and internships. I also decided not to go to grad school (med school) because I was freaked out by how much I would have to take in student loans.
  • DH’s parents paid full freight for them to go to a private liberal arts undergrad + arts post-bac program + 2 masters degrees. IMO, the fact DH never had “skin in the game” is part of the reason they had trouble finding a direction for their life in their twenties. While their education was intellectually enriching, they use none of it in a professional capacity.
DH has pointed out, since we’ll probably have too high of income/savings for our kids to qualify for much in the way of need-based aid, we’d be funding less in the way of educational opportunity than either of us had growing up. Which is a fair point. So it’s a compromise between how much longer am I willing to work versus the capital we want to allocate for opportunities for the kids.

Different “tiers” I’m thinking about (covering tuition/room/board, full degree, based on 2022-2023 cost of attendance, per child):
  • Flagship in-state undergrad (current default): $130K
  • Private undergrad: $300K
  • 2-year unfunded professional Masters degree: undergrad + $150K
  • Medical school: undergrad + $380K

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Sclass
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Re: Would you give your kids money for college or life?

Post by Sclass »

Wow those are big numbers.

I just saw an interesting YouTube video (I cannot find it again) that basically analyzed the repayment of college debt using monthly payments over a decade versus going straight to work at a low paying job debt free and saving a small portion of your income and allocating towards stock investments. The low paying job has the advantages of getting an early start albeit at lower earnings. This is offset by the college graduate not earning anything for 4 years then being saddled with debt payments on some balance like you show in the prior post.

I hadn’t seen a video breaking it down like this in the past. Usually you hear some dogma like this. The source is usually the same place that tells you to max out your 401k and other advice lacking rigorous analysis in ROI.
College-educated workers enjoy a substantial earnings premium. On an annual basis, median earnings for bachelor's degree holders are $36,000 or 84 percent higher than those whose highest degree is a high school diploma. The earnings gap between college graduates and those with less education continues to widen
Anyhow the results of the TVM calculation are stunning. The tuition (capital) costs are so far off mark it really requires a couple of lines of math to show that tuition isn’t a good investment if you just want financial returns*. Generally the worse a theory is the shorter the calculation needed to debunk it. We are pretty much there.

Further more to use a Feynmanism “The experiment is always right.” We’ve tried this and there are a boatload of miserable people struggling to pay off their education loans. This has to be telling us something.

I pulled out my HP12c and ran several scenarios.

1) Working right after college and saving $500 a month (we all know how to do that if you read Jacob’s book) with zero debt.

2) Spending four years earning nothing then going to work at an entry level professional position and climbing the pay scale while paying down a $250,000 loan over ten years or twenty years.

3) having $250,000 (mummy and daddy college fund) and just putting it away and letting it grow at stock market rates over the same time.

I’ll spare you the button presses but the order of increasing net worth at t = 13 (my career) is 3, 1, 2. College educated debtors lose by a wide margin. And of course if you use the power of compounding and take this out to age 65 the college educated ends up a marginal retiree while the case 3 ends up a multimillionaire.

This recently came up because I was asked if I’d contribute to my nephews’ tuitions. I said no it was a waste of money. My financially ignorant family members quoted the quote above about 84% more money blah blah blah lecture and I whipped out my HP12C iPhone app and schooled them in TVM. They adjusted their blinders and ran away. They just want their rich uncle’s money not his financial advice that ostensibly won him the money in the first place. Odd…my brother and I both have STEM PhDs from Stanford but he’s too poor to pay for his kids’ tuitions without a loan from uncle Sclass. That should be telling them something…probably that they’re so dumb and uncreative that they need college. Clearly my nephews are not paying attention to the actual source of the money. They really are blind or maybe just dumb. “Don’t listen to uncle Sclass just get his money and pay for something he says is a waste of money.” Don’t listen to a millionaire go to university to listen to a professor in a threadbare tweed coat with leather patches on the elbows.

This came up yesterday while taking to my neighbors about their uneducated son who makes high six figures (1%er according to Biden) selling on Amazon FBA. The parents are educated but they don’t support the idea of paying today’s cost of tuition. The couple is quite intellectual so it came as a surprise. These people play classical music on their violins for fun and quote Kierkegaard yet they said university tuition is a waste.

*Caveats. Everyone is different. 99% people need some discipline like education, a student loan, marriage and kids, a mortgage or 401k administrator to do anything of substance with their money and time. College isn’t all about money after graduation. Hopefully you get more than that (sex, partying, connection, reputation, culture).

ertyu
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Re: Would you give your kids money for college or life?

Post by ertyu »

what i don't know is why the us won't go en masse to get their degrees in europe. even with paying full tuition and living expenses, it's cheaper - and one could argue more enriching because it exposes you to a way of living and a culture other than your own

ETA: I know people without degrees. we're close, and all of us are narrowing 40. long story short is, their jobs are mostly physical and their bodies are breaking down. this isn't to argue with the point Sclass made; I'm sure the calculations are right and I have no idea who your nephews and nieces are and what the right thing would be for them in life. rather, it's to say that the college vs no college decision comes down to more than just raw calculations.

zbigi
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Re: Would you give your kids money for college or life?

Post by zbigi »

ertyu wrote:
Sun Sep 18, 2022 8:45 am
what i don't know is why the us won't go en masse to get their degrees in europe. even with paying full tuition and living expenses, it's cheaper - and one could argue more enriching because it exposes you to a way of living and a culture other than your own
The smart Americans already come to Poland (and I presume other similar countries) to get their Medical degree here. The tuition and cost of living are laughable compared to what they'd pay in the US, and the actual education is pretty good. Plus, they're the cool American, which nets them a lot of popularity while they're here. I don't know about recognition of the Polish medical diploma in the US, but it must be a solved problem, given how many Americans I see studying medicine in Starbucks in my area.

bostonimproper
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Re: Would you give your kids money for college or life?

Post by bostonimproper »

@Sclass I agree that the opportunity cost of high college costs is probably not worth it vs. a lump sum invested up front on a purely financial basis— this is something I plan to outline for my kids as well so that they can use their college fund allocation wisely, whether or not it’d be for their education, which is ultimately their choice. That said, I don’t really see the “value” of college as being primarily financial (or even educational). Mostly I think it’s:
1/ a class signifier (I’ve found this to be a big “thing” where I live in Boston, where a lot of my social networks are filled with other fancy pants school grads) and
2/ a credentialing mechanism that is required for some professions (e.g. if kid wants to be an architect, engineer, teacher, lawyer, doctor, etc).
For me personally, I’ve seen the impact of those things on my life personally to be pretty stark and profound. But obviously it’s going to depend on the person, YMMV, etc.

@ertyu A lot of the English-speaking nations (UK, Canada, Australia) already have high tuition for foreign students. I imagine if we did see US students go “en masse” to Europe, we’d see a lot more differential pricing based on passport/citizenship. Also, it’s unclear to me how American employers would typically consider degrees from ex-US schools. My knee jerk reaction is that they’d say to a newer grad, “Oh this person probably needs a visa sponsorship” and summarily throw their resume in the trash (unless they’re large enough to handle visa stuff). But, unsure. Definitely another option to keep in mind, though, depending on how our kids’ interests develop.

@zbigi The credentialing bottleneck for doctors in the US is going through a US medical residency, which is a 1-5 year stint (depending on the specialty) of being an underpaid intern-like doctor before you’re a full doctor. Foreign medical residencies typically don’t count, unless you’re from Canada. Preference order is typically US university graduates before foreign med school graduates for filling slots, and there aren’t even enough slots for the US graduates by themselves. So there’s a very good chance those Polish-educated med students plan to stay abroad if their goal is to practice.

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Sclass
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Re: Would you give your kids money for college or life?

Post by Sclass »

@ertyu great points. Sounds a lot more fun to learn about Europe while living there. Not to mention deeper. My roommate in grad school was from London College (UCL). I was stunned how little it cost him.

@bostonimproper good points. Reminded me I didn’t list “access” to my caveats. There is certainly more to it than money.

Another point I don’t make is it depends what you’re choosing over paying for college. A foray into street crime? I grew up in an area of LA where the greatest thing that could happen to a kid from the hood was getting accepted to UCLA. I literally have high school classmates working as prosecutors putting other classmates behind bars. So it really depends on the individual.

ducknald_don
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Re: Would you give your kids money for college or life?

Post by ducknald_don »

ertyu wrote:
Sun Sep 18, 2022 8:45 am
ETA: I know people without degrees. we're close, and all of us are narrowing 40. long story short is, their jobs are mostly physical and their bodies are breaking down.
It's no good comparing people who were unlikely to enter further education with those who did. Instead you need to pick out the people who could have gone but chose not to. I've not seen any figures for that, I suspect because it wouldn't show the universities in a good light.

Slevin
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Re: Would you give your kids money for college or life?

Post by Slevin »

I'll be the idiot who chimes in to say that coding bootcamps cost on average 10k, and the average salary of coding bootcamp grads who land jobs straight out of the bootcamp is something like 81k. The coding bootcamps take a few months. And there are known pipelines of bootcamps -> employers these days. So if you have the knack for coding essentially you can 8x your initial investment in immediate earning potential and get yourself to a highly paid job in about 6 months. And I've never known anyone who says they are a "software engineer" to get looked down on at a party for not being highly educated or being unintelligent (though certainly they have their own social stigmas of nerdiness / etc). Those who skipped the 4 year college gig and are now in the employment pipeline are generally seen as incredibly intelligent (thanks Bill gates, zuck, and co).

Shrewd kids who need the college education for certification purposes clear out all the pre-requisite / general credits at a community college in the area for a year or two instead of hitting an actual college immediately, and generally accrue 1/2 the debt or so of normal college students. They still party and have as much fun during the whole time, especially if they go to community college in the same city as they get the degree. Living in that area for a year or two beforehand also gets the student in state tuition, further driving down the actual cost of the degree. Furthermore, students who take up a part time job with the university often get free credits in addition to payment.

TL;dr most of these educational systems can be gamed to a decent degree with some minor thinking. Or, you know, just go to school in Europe where they consider higher education a right and don't try and scrape every penny from parents just trying to educate their children.

mathiverse
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Re: Would you give your kids money for college or life?

Post by mathiverse »

It'd be nice to raise kids who don't need to go to college. I'm not a parent yet, so I don't know how feasible that is. Combining an ERE lifestyle with child rearing seems like it could lead to that somehow. An ERE parent has a lot more than money to provide over a childhood that will increase the odds that college is unnecessary.

If it's a matter of the kid wanting to go to college to go into a field where a credential is necessary, helping the kid game the system in the ways that Slevin and others mentioned (and there are more options! dual enrollment in high school anyone? CLEP tests? scholarships? manage assets to increase finaid availability? etc) would make it possible for the kid to reduce the cost to a reasonable ERE friendly amount.

What is an ERE friendly amount? One back of the envelope calculation to get an estimate would be as follows. The Kids on ERE thread suggests that $200/month would be enough to raise a child in an ERE manner. $200 * 12 * 30 = $72,000 (~3% withdrawal rate). So your stash has $72k earmarked for child expenses anyway. Once the kid reaches college age, you don't need that $72k of income producing assets anymore, so maybe you could use that as their college fund. How do you get uni to fit in that budget? There are many suggestions in this thread already. If you think kids cost more than $200 per month, then you have an even larger amont of your stash that can be repurposed for college instead of paying their living expenses.

Laura Ingalls
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Re: Would you give your kids money for college or life?

Post by Laura Ingalls »

This is our current stage of life. We are bungling through it. Trying to be supportive without smothering. Thread about older child.

viewtopic.php?p=222309#p222309


Elder offspring is economically self-sufficient and seems to be doing well. His mental health challenges have improved. He enjoyed school and the professional development and learning he has in his current work environment. Generally his just seems happier and acts less moody. He also seems to be pretty frugal and his roommate is a good human.

He is currently still on our health insurance and phone plan but he doesn’t add anything to the healthcare expense. He did buy his current phone. I told him he can stay on our auto insurance but he needs to pay his share when we get the next bill. In total we have about ~$20k into his higher ed. The bulk of this was from 529 which was about 60% gains. The remainder was cash flowed.

Younger offspring is currently planning attending one of the three in state colleges in our present state. He foible with school is that he loves the learning and socializing but not always interested enough in producing a product. He runs indecisive and overthinks stuff (older sibling tends to be impulsive.) He is very nurturing. He has talked about lots of different things pilot, nurse, finance/business, and k12. Who knows? I suspect his route to independence will be slower but steady and less angst prone. Maybe more of my money and less of emotional resources.

7Wannabe5
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Re: Would you give your kids money for college or life?

Post by 7Wannabe5 »

My DD31 went to VERY expensive private school on academic scholarship. Beyond class signifier, it also had a good deal of influence on her current social circle and choice of husband.

Also, it’s been my experience that a B.S. in math is like having a decent LBD hanging in the closet. Even if you don’t use it very often, never a regret purchase.

white belt
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Re: Would you give your kids money for college or life?

Post by white belt »

7Wannabe5 wrote:
Sun Sep 18, 2022 4:15 pm
My DD31 went to VERY expensive private school on academic scholarship. Beyond class signifier, it also had a good deal of influence on her current social circle and choice of husband.
This. In my experience, college usual has a large influence on social circles. If you go to a state school, your social circle will likely be made up of lower and upper middle class. If you go to a private school, your social circle will likely be almost exclusively upper class. Depending on lifestyle and goals, this can be a good or a bad thing. I have friends from high school who went to expensive private schools and then basically got locked into the expensive lifestyle of their peers, except their peers could afford that lifestyle while they couldn't. So they ended up getting a distorted sense of what constitutes typical income and spending. The elites send their kids to Ivy League schools so they can rub shoulders and pair up with others of the same social class.

mooretrees
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Re: Would you give your kids money for college or life?

Post by mooretrees »

white belt wrote:
Sun Sep 18, 2022 6:15 pm
This. In my experience, college usual has a large influence on social circles.
I think this applies if, and only if, you stay nearish to your college. I moved away immediately and my college has had next to nothing to do with my current life. For my siblings who stayed closer, it might be different. I didn't go to a top Ivy league school, but I have to imagine that those schools encourage networking with a higher name recognition cache. My BIL went to the Naval Academy and it was almost as important as his Dad's business connections in his career.

I am only considering saving for DS's college fund to give the grandparents something to contribute to. I have no desire to save a huge sum of money for college. If he's anything like DH, then a trade school will be the better route for him. We're definitely raising him alternatively, and I don't plan on stressing the importance of college. I can't predict how important college will be in 13 years, but I'm hedging my bets that if I'm an involved parent and I save 20-40 K for college (with the grandparents help) than he will have some options. I'll help with money, to an extent, but definitely with energy.

white belt
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Re: Would you give your kids money for college or life?

Post by white belt »

mooretrees wrote:
Sun Sep 18, 2022 9:09 pm
I think this applies if, and only if, you stay nearish to your college. I moved away immediately and my college has had next to nothing to do with my current life. For my siblings who stayed closer, it might be different. I didn't go to a top Ivy league school, but I have to imagine that those schools encourage networking with a higher name recognition cache. My BIL went to the Naval Academy and it was almost as important as his Dad's business connections in his career.
This is true. However, it is my opinion that the common pattern of growing up in location A, going to college in location B, and getting a job in location C really kneecaps one's social capital and leads to a lot of friction. I'd at least advise a high schooler today to consider that as a factor when choosing between universities. Some alumni networks are more national in nature (like the most prestigious Ivy's), however it seems a lot of public school alumni networks are more regional.

theanimal
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Re: Would you give your kids money for college or life?

Post by theanimal »

We still have a few years to go but as of now we are planning on homeschooling our daughter. My thought is to emphasize the importance of skills and learning rather than focus on acquiring a piece of paper from some institution. We already live differently than the norm and do not plan on changing anytime soon, with every intention of laying bare our decision making process and why we do the things we do. This includes financials of our household and principles of ERE. Both Mrs. Animal and I went to college, but neither of us liked it and I didn't find it valuable from an educational standpoint. However, we do think it is still valuable if pursuing a technical style degree like a STEM field.

We are both of the opinion that it is something that would be more valuable and appreciated later on, rather than at 18. Mrs. Animal would like to encourage a gap year (or years) and I think something like a trade, starting a business or getting a job somewhere would be just as valuable, then going to college later on. Like others here, we would pay for in state tuition. 4 years worth equals roughly $40,000. Children, like adults, are eligible for the annual Alaska Permanent Fund Dividend. On average it is probably something like $1,500 (this years was $3,284). I have heard of people who use that as a college fund but I would be more inclined to give that to her to do as she pleases. So I guess our answer is both.

Ideally, we set her up with skills to be able to not only take care of herself and loved ones, but start a business without needing to acquire a credential. The other stuff is just a bonus.

mooretrees
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Re: Would you give your kids money for college or life?

Post by mooretrees »

white belt wrote:
Mon Sep 19, 2022 1:52 pm
This is true. However, it is my opinion that the common pattern of growing up in location A, going to college in location B, and getting a job in location C really kneecaps one's social capital and leads to a lot of friction. I'd at least advise a high schooler today to consider that as a factor when choosing between universities. Some alumni networks are more national in nature (like the most prestigious Ivy's), however it seems a lot of public school alumni networks are more regional.
I don't agree that this 'kneecap's one social capital at all! I think this might be true if social capital were a difficult thing for the individual to develop and the college network was strong. I think social capital can be very independent of any formal education setting. I've moved several times and this last location is where my social capital is the most developed. For example, last week I stopped by to visit with a farmer friend, helped her harvest some basil and walked away with a lot of veggies. I didn't go in expecting any veggies, just wanted to say hi. I shared the huge bag of basil with my upstairs neighbor and now two families have yummy pesto in their freezer. No mentions were made of anyone's college.......and yet social capital still functioned :lol:

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