Alright so I want to preface this with two things.
First, I don’t have kids yet. So this is an unbiased and unemotional look at the ideal ways and reasons I would save money for my kids.
Second, if you are saving money for your kids to go to college, good job. I’m going to point out some ways for you to improve and some things to be aware of, but regardless, you’re doing more than most parents are by caring enough about your child’s future to do something about it.
This article isn’t about whether or not I should save for my kids. Of course I should! It’s about whether that money should be restricted and used only for college.
If I’m a parent I should save for my kids.
Did you know if I save $850/mo for my child at 10% from the year they’re born until age 24, they’d be a millionaire?
Now I’m not saying that’s what I’d do exactly, but I am pointing out that I can make a significant impact for my children in their lives.
So the question is not “should I save?”
To really logically answer this I need to know what the purpose of college is.
I’d say the purpose of college for me is a positive environment where my child learns skills that directly provide him or her long term employment opportunities to earn above average income.
In other words they a positive place where they learn stuff that gets them a career where they make more money than most.
That’s the sole purpose of college in my viewpoint.
So we now need to ask: Does college provide that?
Aside from a degree, let’s look at the production statistics of colleges averaged across the nation.
So first is a positive environment right?
When I researched this, I learned that 80% of college students admit to drug or alcohol abuse during college.
This means there is an 80% chance my child will abuse drugs and alcohol while away at college.
So we know the environment doesn’t check out.
I trust my child won’t use drugs and so maybe I can overlook that part if I know they’ll still get the career they went for.
A quick look at that showed that 53% of college grads are either unemployed or cannot find work in their degree field.
Not only that but there is $1.5 trillion in student loan debt with an expected default rate of 40% by 2023.
This means they also aren’t making enough money to even pay off their student loans.
So there’s an 80% chance my child will abuse substances at college.
The likelihood is more than 50% that they’ll be unemployed or not be able to use their degree after they graduate.
And the way it looks, they won’t make enough money to pay back their student loans.
The idea is that if I put away enough money in their college fund they can avoid those student loans and be more responsible. Right?
I learned that the average college savings fund balance is only about $25-$30,000. Which only covers 1 year at the average public college.
My saving for in their college savings plan is a noble and respectable effort, but if I’m only providing enough for them to pay for 1 year then I am actually guaranteeing they’ll have student loan debt.
They’ll go because they feel obligated because I saved money for them, but it won’t cover the remaining 3 years and they’ll likely have to borrow to pay for the rest.
It’s hard to confront, but I may actually be financially ruining my child by doing this.
Well sure, but not the students.
The federal government makes about $85 billion per year on student loans.
Wall Street makes over $6 billion per year in asset management fees on college savings plans.
Colleges have accumulated over $650 billion in university owned wealth that earns a steady 6–8% return for them each year (just a cool $45 billion in annual interest) and yet they still raise tuition by 7% on average.
That’s over $136 billion that institutions make on the college education system every single year and we aren’t even including new tuition sign ups.
Everyone in the college game seems to be getting wealthy on it but us and our children.
Embrace different options.
There’s trade schools, professional licensing, secondary education programs, internships, apprenticeships, entrepreneurism, investing, volunteer opportunities and so many other things that don’t require a college degree.
I didn’t go to college and I made it into the top 1% of income earners by the time I was 25. That’s around when most of my friends were graduating and looking for jobs.
I would use the Sacred Account Jr.
It’s a life insurance policy that I can save money in for my kids that will grow more than a traditional college savings plan, is tax free, can’t lose money, and can be used for anything. Penalty free.
Click here to learn more about that.
All in all, we should take responsibility for our children’s futures. But part of that means making sure we are saving money in the right places and for the right things.
Own Your Potential,
Jerry Fetta helps create financially educated and wealthy families who navigate their economic futures with certainty and help build prosperous communities around them. If you’d like to experience this for yourself and your family, then get more information about Jerry Fetta and Wealth DynamX by going to Membership.JerryFetta.com