your children keep a journal of how they choose to use their money. Every time they put money into a savings account, spend it, or donate it, I want them to record their thoughts and feelings in the moment. Be sure to sit down and review the journal after six months or a year. The journal is a written record of your child building a dream of her own. In it, she is beginning to explore and experience what it means to make a choice to consciously spend less than you have, to take pleasure in saving, as well as to enjoy spending.
When you are reviewing the journal you might also ask your child to reexamine her purchases. For example, if your daughter spent $35 on a video game eight months ago, ask her if she had it to do over again, would she rather have that video game or the $35 in cash. This conversation will lay some important groundwork for future conversations. In the coming months when your daughter is contemplating a purchase, you can ask her if she thinks this will be a purchase she will love or regret six months from now. Don’t say it in a judgmental way. Your goal here is to simply guide your child through a thought process, not to impose opinions of your own.
LESSON 3. HOW TO CREATE A FINANCIALLY HONEST COLLEGE STRATEGY
College can be one of the best investments you and your child will ever make. The lifetime earnings advantage for a college graduate is about $1 million compared to a high school grad. Moreover, our economy creates more opportunities for college graduates. In late 2010 the unemployment rate among people 25 years or older with a high school degree (and no bachelor’s degree) was 10%. The unemployment rate among college graduates was 4.4%.
You will get no argument from me that college matters. But there is a very important truth I need each and every family to stand in: Cost matters. Putting your children through college was a cornerstone of the American Dream, particularly for immigrants and first-generation children. But the New American Dream cannot simply be, I want my children to graduate from college. It must be, I want my child to graduate from a college that is affordable for my child, and for me. The fact is, most families don’t stop to think through the cost part. Oh sure, you know full well that it is a lot more expensive than you can afford to pay out of your savings. But that hasn’t made you truly cost sensitive. You still tell your kids to set their sights on any school and you will figure out the money later. And then you end up making a mess of your other important dreams. You stop saving for retirement, or worse yet, you use money in your retirement accounts to pay the college bills. That is not standing in your truth. It is incumbent on you when your children are young to develop a strategy for how as a family you can send your children to college without compromising your other financial goals.
WHO SHOULD SAVE FOR COLLEGE?
Before you start to save one penny for a child’s future college costs, I insist that you have the following financial priorities taken care of:
You do not have credit card debt.
You have an eight-month emergency savings fund.
You have a term life insurance policy.
You are saving for retirement; aiming to set aside 15% of your gross salary.
Until all of that is in place you are not to think about saving for college. Many of you have heard me say this repeatedly over the years: There is financial aid for college. There are loans for college. But there is no aid or loans to help you in retirement. There is no aid if you run into a rough patch and you do not have sufficient funds in an emergency savings account to navigate your way out of trouble.
Your first order of business is building a solid financial foundation for your family. Only when that is in place can you begin to save for college. And know full well that there is absolutely no shame if you are not able to save. As I explain later in this chapter, there are affordable ways for your child
When you are reviewing the journal you might also ask your child to reexamine her purchases. For example, if your daughter spent $35 on a video game eight months ago, ask her if she had it to do over again, would she rather have that video game or the $35 in cash. This conversation will lay some important groundwork for future conversations. In the coming months when your daughter is contemplating a purchase, you can ask her if she thinks this will be a purchase she will love or regret six months from now. Don’t say it in a judgmental way. Your goal here is to simply guide your child through a thought process, not to impose opinions of your own.
LESSON 3. HOW TO CREATE A FINANCIALLY HONEST COLLEGE STRATEGY
College can be one of the best investments you and your child will ever make. The lifetime earnings advantage for a college graduate is about $1 million compared to a high school grad. Moreover, our economy creates more opportunities for college graduates. In late 2010 the unemployment rate among people 25 years or older with a high school degree (and no bachelor’s degree) was 10%. The unemployment rate among college graduates was 4.4%.
You will get no argument from me that college matters. But there is a very important truth I need each and every family to stand in: Cost matters. Putting your children through college was a cornerstone of the American Dream, particularly for immigrants and first-generation children. But the New American Dream cannot simply be, I want my children to graduate from college. It must be, I want my child to graduate from a college that is affordable for my child, and for me. The fact is, most families don’t stop to think through the cost part. Oh sure, you know full well that it is a lot more expensive than you can afford to pay out of your savings. But that hasn’t made you truly cost sensitive. You still tell your kids to set their sights on any school and you will figure out the money later. And then you end up making a mess of your other important dreams. You stop saving for retirement, or worse yet, you use money in your retirement accounts to pay the college bills. That is not standing in your truth. It is incumbent on you when your children are young to develop a strategy for how as a family you can send your children to college without compromising your other financial goals.
WHO SHOULD SAVE FOR COLLEGE?
Before you start to save one penny for a child’s future college costs, I insist that you have the following financial priorities taken care of:
You do not have credit card debt.
You have an eight-month emergency savings fund.
You have a term life insurance policy.
You are saving for retirement; aiming to set aside 15% of your gross salary.
Until all of that is in place you are not to think about saving for college. Many of you have heard me say this repeatedly over the years: There is financial aid for college. There are loans for college. But there is no aid or loans to help you in retirement. There is no aid if you run into a rough patch and you do not have sufficient funds in an emergency savings account to navigate your way out of trouble.
Your first order of business is building a solid financial foundation for your family. Only when that is in place can you begin to save for college. And know full well that there is absolutely no shame if you are not able to save. As I explain later in this chapter, there are affordable ways for your child
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