01The Goal of Parents Everywhere
All parents wants their children to have all the opportunities they possibly can to succeed in life. Parents spend their days ferrying their kids to and from activities, helping with homework, encouraging them to be focused and ambitious. Parents are proud to see their kids study hard, and most hope that their young adults will be admitted to an excellent college, which will, after four or more years, send them out into the world ready to do great things. Parents are right to want nothing but the best for their kids - but they need to remember to plan for their own best lives, as well.
02Realistic Expectations vs. High Hopes
Top notch colleges don't come cheap, as everyone knows. Freshman students entering Boston University in 2017, for example, paid $67,352 for one year of tuition, room, board and fees. While many students are able to find financial aid packages, grants, student loans, and other supplements for a pricey education, not all can take advantage of these opportunities. Parents must be honest and realistic with their kids during the application process about how much they will spend on college. Parents need to encourage their high school seniors to investigate all options, including in-state schools which will cost a fraction of a private college which can save significantly on the cost of a bachelor's degree.
03You Can Borrow for College, Not for Retirement
Cashing in your 401K or taking a home equity line of credit on your house to pay for college may seem like a good idea at the time, especially if your kid gets into a dream school that you simply cannot afford - but don't do it. Any wise financial advisor will tell you that using your retirement nest egg, whether it's the value of your home of years of savings, to pay for college is a big mistake.
Here are a few reasons why:
- There is no guarantee that your child will finish college, in which case you will have spent your savings and not even get a degree out of it.
- Your child can borrow money to pay for college, but there is no "retirement loan" for you to apply for when it comes time for you to stop working.
- While you would like to believe that your child will help you financially as you get older if you pay for his or her education, you cannot predict what the future will bring.
"You can take out student loans for 3.8 percent, or you can put your money in a diversified investment portfolio across stocks and bonds, and you're going to average closer to 8 percent. If you look at the numbers with the same dollar amount, investing in retirement, you're going to be way ahead." Wayne Connors, managing partner 401K Investors, LLC (US News and World Report)
04Students Paying (and Saving) for Their Education is Normal
Students are chipping in more and more for their college educations, and with good reason. As parents and young adults have grown more and more open and connected with each other, parents are not as hesitant to share their concerns about their own futures while helping their children get started with theirs. As young adults begin to understand the enormous costs of college, and the huge expense of retirement, they will find themselves wanting to do more to help pay for school.
80 percent of college students hold down jobs while getting educated, typically 19 hours a week during the school year, according to the 2013 College Student Pulse survey conducted by YouGov for Citi and Seventeen Magazine. They are helping in other ways, too - including living at home instead of on campus to save costs. The same YouGov survey found that 35 percent of college live with their parents; 32 percent live in campus housing; 18 percent live off campus with friends and 4 percent live off campus by themselves.
By picking up some of the financial responsibility for their college education, young adults are giving their parents room to continue to save and invest for their retirement and elder years. Isn't a secure future for their parents important for young adults peace of mind? Of course it is.