Saturday Critical Action – Have a Family Talk About College
Welcome to the Saturday Critical Action. Each Saturday we take a weekly action from Jonathan Clements‘ blog Humble Dollar and “militarize” it for you. Jonathan Clements was a longtime personal finance columnist for The Wall Street Journal, and he offers great advice at the best price you can get…free. Here is this week’s critical action:
HAVE A FAMILY TALK ABOUT COLLEGE. How much financial help can you give your children? If they’ll need to shoulder part of the cost, tell them long before they start eyeing colleges. What career do your teenagers plan to pursue? If they’ll likely end up with a modest income, you should counsel against colleges that will require hefty student loans.
This has been a controversial subject in our household.
College is Taken Care Of
We have two children and two GI Bills that are transferred to them. In addition, for the first half of their lives we couldn’t transfer the GI Bill, so we were saving hefty sums in their 529 plans in anticipation of paying for a 4 year private education. This was the type of education my wife and I had, so it seemed a reasonable goal as parents.
Two kids. Two GI Bills. Two 529s that were heavily invested for 10 years with the magic of compound interest and a 9 year bull market. College is taken care of.
But do you tell your children this? If you do, when?
I Told My Daughter
For a long time my wife did not want them to know about any of this. She felt it would sap them of their motivation to succeed and achieve at a level that would earn them an academic scholarship. For many years we did not tell them about their significant educational advantage.
When my daughter was 16, I told her about the GI Bill and the 529 plan. I told her if she could find a state school or a private school that would be covered by the GI Bill, I’d use the 529 for her graduate school if she wanted to go. Initially, she seemed to take this well and it did not de-motivate her academically.
Now that she’s 17, we are trying to get her to apply for scholarships and hearing, “Why should I apply for scholarships? I have the GI Bill.”
For many of these scholarships, if you don’t need them you’d just get to keep the money and put it toward books, housing, or whatever you want. My wife and I, of course, want her to apply for them, but so far motivation seems lacking.
What’s the right answer here? I don’t know, but telling my daughter about the GI Bill and her 529 plan reduced her motivation to apply for scholarships. If she didn’t know about the GI Bill and 529, I’m sure she’d be more motivated to apply.
Here’s our take on saving for college.