I started to answer some of the school loan comments in the comments section, but it might make more sense to answer them as their own post because several comments had overlapping themes.
On Working while in College:
Both Mr. A and I worked while we were undergrads (we met working at the same restaurant), which is how we both managed to afford traveling (Mr. A on a trip to Europe and then to China for a year. I backpacked in Europe, lived in Cambodia for 3 months and visited Mr. A in China). I absolutely expect the girls to work while they are in college.
I actually want them to get jobs in Jr. High (papergirls?) and high school so we can start contributing to a Roth IRA in their names asap. (Seriously, click that link. Compounding interest is mindblowing!) They need to earn actual income for us to be able to do that, so they will be working. Work builds character. It will be good for them to appreciate the amount of effort that goes into making a living wage.
On parenting/my parents and money:
My parents wouldn’t talk to us about money either. I developed a deep-seated fear of debt from listening to their whispered adult conversations about money when I was very little. They were pretty hard up when I was very young because they both went to college after I was born (my dad on an athletic scholarship and my mom with loans). I think my mom finally graduated when I was about 8 years old. After that, our family’s financial circumstances improved quite a bit.
It turns out my parents managed their money very well and were very financially conservative(especially considering they were teen parents!) but the debt-phobia had already taken root in me. It wasn’t until two years ago when I accidentally saw their tax return that I figured out how much money my parents made each year. I am sure they would be horrified to find out that I know.
We are already working on teaching the girls to be financially responsible. M has to split her $7 allowance and put 25% aside for charity and 25% away for long-term savings. She also just opened her first savings account and likes to tell me each week how much she has saved already.
Retirement vs. Paying for the girl’s college:
I am incredibly uncomfortable having any kind of debt. I have just come to accept that in our circumstances it is a necessary evil. If we can help the girls avoid the burden of school loan debt, I would like to do that. Our debt has certainly impacted the job and career choices we have made (i.e. we always need to make enough to live and pay down our debt.) That being said, I expect that they will probably want to attend graduate or professional school and they will have to fund that themselves if they burn through the amount we agree to give them.
One thing that makes me fairly comfortable with the idea of paying for 4 years of college for each girl is the likelihood that Mr. A’s income is going to continue to rise in the next 10 years before they go to school. It isn’t 100% certain, but given his current career trajectory and employability, it is very probable. It is also quite likely his final 20 years of employment it will likely be much, much higher than his income now (Conservatively speaking, maybe more than four times his current salary?).
Even though we know we will probably have more money in the future, we maintain our current standard of living with the income we have right now with no consumer (credit card) debt. We save for retirement like this is the amount we will always earn and this is the amount we will need to live at our current lifestyle in retirement. One of the reasons we want to buy our final house now is to lock in our housing expenses forever (or at least until Mr. A retires and I demand we spend part of the year somewhere warm). When (or if!) our financial circumstances change, we will adjust accordingly. Whenever we have more income, we will save more for retirement and college and pay down debt faster.
Add me to the people who are appreciative of your being so upfront with all of this! (I now have an add-on question for you, which is that I’d love to hear more about your Masters’ in NPA.)
$ is so weird, because since it’s often not discussed in families, there can be a lot of reinventing the wheel that goes on from generation to generation. I differ from my folks as far as what I feel comfortable investing in (very little, as I find most publicly traded companies’ policies to be super-problematic), but at least I knew some of what they did when it came to socking away cash, and I grew up thinking of that as normal.
As for kids and jobs, I totally agree. I’m still very thankful that I ended up working seriously (10-20+ hrs/week) while in college – my brother went to school close to home and had better scholarships, so his living expenses got comped by the parents. While there were other differences contributing to our decisions to work (he’s an engineer, I was in social sciences and his workload was worse), I *know* that managing my schedules and having that responsibility to other people was a life-changer for me.
Thank you so much for your willingness to share. It’s really helpful and interesting to read a real life perspective.
We plan to pay for the Tongginator’s college as well. We may not be able to pay for everything, but we plan to save enough for her to at least attend one of two or three decent state schools. And, if she chooses to go out of state, we’ll contribute as much as we can.
I feel very, very blessed to have earned a four-year-degree (and some grad school) with zero debt. (It wasn’t all my parent’s money. I also worked and earned scholarships.) Like you, I feel all tense when I think of debt and hope to help my children avoid it if possible.
Just in case this wasn’t clear… if we are able to adopt again, it goes without saying that we’d pay for college that time around, too.
I too appreciate the openness. I think a lot of problems are caused by people’s secretiveness about money, and more open discussion would help people make more logical choices.
We also plan to pay for our children’s education. They have 529 plans. From my research this money is theirs. It basically functions like a Roth Ira — post tax contributions, and if the money is used for qualified educational expenses, the earnings are tax free. If they’re not, there’s penalties + taxes. They gain control of the asset at some point. If they don’t use it — have scholarships, or don’t go to college, it can be used by their children. We can afford do fund their 529s and save for retirement.
I do not know whether my children will work. I agree with the benefits of work described by commentor 1. But — there are work load issues, and it’s difficult to take away opportunities to do uncompensated potentially career enhancing training for income (ie working in a restaurant.
A correction–one of the benefits of a 529 plan is that the owner, not the beneficiary, retains control. If you ended up needing it for another purpose, you could reclaim it, and pay a penalty on the earnings.
I really like your posts about money. We make less than you, I think. Or the same, but we are both working so daycare eats up a huge (huge!) chunk.
We have very little debt. I have a small student loan that we could pay off with our tax returns, but right now we are holding onto the money because we want to buy a house and need to have the cash reserves. I am so, so sick of renting and moving every year. We are moving back home, and we want a permanent address. So we are thinking about money a lot right now. I have to keep reminding myself that just because other people are living a lot larger, they aren’t necessarily making the best decisions.
I started babysitting at age 10 and have never stopped working. We didn’t have much money growing up (8 kids on a single income) neither of my parents went to college, so school was never that important. Working hard – that’s what mattered.
I went to community college my first two years so was able to pay as I went. I got my 4-year degree from a state school so even financing it completely with loans I only borrowed 11,000 which was way more than I needed, but I lived well:) I paid that off when I refinanced a house about 10 years ago. It was a good move at the time because the interest rate was huge and I wasn’t going to be in the house forever.
I took a paycut when I came to my current job. I wanted an 8-5 normal workday so I’d be able to be a mom. I’ve been supplementing my income with student loans working toward my MBA. My goal is to finish just as my daughter goes to Kindergarten this fall, so I can use the daycare money to pay the debt quickly. A recent raise FINALLY made up the difference in pay, so I’ll be able to live without the loans (I’ve taken them even though I have tuition reimbursement).
I just paid down a boatload of consumer debt but I still have more than EVER.
I know I’m a lot better off than a lot of people, but I hate having it hang over my head. I can’t wait to have that out of the monthly bills and just focus on retirement and mortgage. Then we can travel more, which we both seem to love;)
Based on the increase of tuition vs the increase in the cost of living, I feel we have no choice but to pay for our children’s education.
I don’t think it is feasible anymore to expect a child to pay for their education completely by themselves.
Both of my kids earn allowance, plus we have a coin jar going. The adult dump their coins in and then the kid get $25-$50 of the change in their bank accounts when we turn thr coins the the bank. I get the rest in my account.
Money is such a difficult thing. I have tried hard to be open without giving the girls absolute numbers of our salaries….