Kids 4 year college money .. is this a good idea ?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
lazybones18
Posts: 42
Joined: Thu May 14, 2020 9:31 pm

Kids 4 year college money .. is this a good idea ?

Post by lazybones18 »

Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
KlangFool
Posts: 22810
Joined: Sat Oct 11, 2008 12:35 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by KlangFool »

OP,

No.

As a policy, I do not loan money to my friends and family. If they need help, I give whatever amount that I can afford. And, the condition of my gift would be that they should not pay me back. If not, I would not give them the money.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
BernardShakey
Posts: 488
Joined: Tue Jun 25, 2019 10:52 pm
Location: CA

Re: Kids 4 year college money .. is this a good idea ?

Post by BernardShakey »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
This is not what I would do. It sounds as if you don't have confidence in your kids' ability to value their education, work hard, and do well. I mean, what do you think they would do with a paid for college education ?
An important key to investing is having a well-calibrated sense of your future regret.
Hiker8
Posts: 47
Joined: Mon Sep 23, 2019 11:09 am

Re: Kids 4 year college money .. is this a good idea ?

Post by Hiker8 »

If you can afford to pay for your children's education, do you really want to saddle them with debt upon graduation? Also, how do you determine the threshold for a recent college graduate to be “doing well financially”? This seems like a bad idea, even if you have good intentions, unless you can’t afford to pay for their education yourself.
mortfree
Posts: 2645
Joined: Mon Sep 12, 2016 7:06 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by mortfree »

I forget the exact terminology.

Let them get loans each year where the amount borrowed increases but maxes out.

I remember graduating with 18,500 in loans. Parents took loans for the rest.
User avatar
cashboy
Posts: 648
Joined: Tue Sep 11, 2018 5:03 pm
Location: USA

Re: Kids 4 year college money .. is this a good idea ?

Post by cashboy »

you might consider having them 'contribute' something to the overall costs to make them feel that they have a vested interest.

for example, they could pay for books or fees (via a job or small student loan) while you cover the main costs.
Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CASH - Canned Beans - Rice - Bottled Water)
esteen
Posts: 426
Joined: Thu May 23, 2019 12:31 am

Re: Kids 4 year college money .. is this a good idea ?

Post by esteen »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
Although I understand the sentiment, I don't like this idea for a few reasons.

1. this means you will diced whether they are doing "well enough" financially after college to forgive the loan. And what if they feel they are not doing well enough, but you say they are? What if their financial "well off" trajectory after college isn't linear, but up and down, and you chose to forgive (or not forgive) at the wrong moment in time? By you having the authority to unilaterally forgive or not, there is a high likelihood of frustration or resentment on one or both sides.
2. The incentive is backwards - if they do well enough, you take away money from them (the money you loaned them), but if they aren't doing well they don't have to pay you money. It's incentivizing them to not do well after college.
3. Like Klangfool said, I don't loan money to friends and family; for the reasons described above, plus it can cast a financial shadow over your otherwise friendly social interactions. Love and caring is now mixed up in a business transaction, and if someone perceives the rules of that transaction to be unfair, the love part of the relationship is affected too.

I'd either to decide to pay for some or all of it up front, and that's it.
This post is for entertainment or information only, and should not be construed as professional financial advice. | | "Invest your money passively and your time actively" -Michael LeBoeuf
User avatar
bampf
Posts: 867
Joined: Thu Aug 04, 2016 6:19 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by bampf »

KlangFool wrote: Mon Nov 22, 2021 5:51 pm OP,

No.

As a policy, I do not loan money to my friends and family. If they need help, I give whatever amount that I can afford. And, the condition of my gift would be that they should not pay me back. If not, I would not give them the money.

KlangFool
I go one step further in that I don't even discuss money with family anymore except with my kids for the express reason of teaching them about finance and so forth. Too many emotions, too much hassle and nothing good ever comes of it. I gift money. I never lend and I never discuss.

--Bampf
Nescio
pizzy
Posts: 507
Joined: Tue Jun 02, 2020 6:59 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by pizzy »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm we all know what happens when you give people free money :sharebeer
What happens when you give people free money?
Luckywon
Posts: 1710
Joined: Tue Mar 28, 2017 10:33 am

Re: Kids 4 year college money .. is this a good idea ?

Post by Luckywon »

Your kids are likely not to remember your proposed experiment as fondly as you.
shess
Posts: 1359
Joined: Wed May 17, 2017 12:02 am

Re: Kids 4 year college money .. is this a good idea ?

Post by shess »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more
If there's any relationship I want to foster with my kids, it is not the kind of relationship I have with my bank. Look at your finances, and draw lines you can live with and stand behind, rather than trying to inject artificial constraints into the system. It's bad enough when your kids suspect you are doing something for artificial reasons, it's worse when you are actually doing it for artificial reasons.

I'm not saying you MUST pay your kids' college. I'm just saying pay it, or don't pay it, don't try to make it their fault.

As far as whether your kids will "value" their education more, that's a 20-year project. Either they are that kind of kid, or you raised them right, but if they aren't that kind of kid or you didn't raise them right, structuring your college payments isn't going to suddenly turn things around.
esteen
Posts: 426
Joined: Thu May 23, 2019 12:31 am

Re: Kids 4 year college money .. is this a good idea ?

Post by esteen »

pizzy wrote: Mon Nov 22, 2021 6:30 pm
lazybones18 wrote: Mon Nov 22, 2021 5:47 pm we all know what happens when you give people free money :sharebeer
What happens when you give people free money?
they get lazy bones :D
This post is for entertainment or information only, and should not be construed as professional financial advice. | | "Invest your money passively and your time actively" -Michael LeBoeuf
carminered2019
Posts: 1001
Joined: Fri Jun 21, 2019 7:06 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by carminered2019 »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
I do have a notarized promissory note for over 300K that my daughter signed and to pay me back
after her medical school.
dukeblue219
Posts: 2229
Joined: Fri Jan 29, 2016 12:40 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by dukeblue219 »

I wouldn't.

If anything you're punishing them for working hard and getting a good job by forcing them to pay you back. Someone who can do the first part isn't going to learn an even stronger work ethic by having to pay back their parents.

A slacker who drops out of college and has their loan forgiven by parents isn't motivated anyway.

Let your kids start life on a clean slate. It's hard enough to get your feet under you as a 22 year old anyway.
User avatar
Kenkat
Posts: 7748
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Kids 4 year college money .. is this a good idea ?

Post by Kenkat »

I spoke to my good friend Vinny “the Toe Cutter” about this. He says only do this if you are prepared to do what is necessary to collect on the loans.

In other words, no, don’t do this.
OldBallCoach
Posts: 595
Joined: Mon Dec 10, 2018 5:22 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by OldBallCoach »

carminered2019 wrote: Mon Nov 22, 2021 7:03 pm
lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
I do have a notarized promissory note for over 300K that my daughter signed and to pay me back
after her medical school.
I hope your DD bills you everytime you ask for some free advise....and I hope she picks out a nice nursing home for you as well...
OldBallCoach
Posts: 595
Joined: Mon Dec 10, 2018 5:22 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by OldBallCoach »

Money and family are not a good mix....if you can pay it...pay it...and be grateful that the kid gets an education. I am not a fan of " heres the deal" when it comes time to money and family...give em the loot.
User avatar
greg24
Posts: 4111
Joined: Tue Feb 20, 2007 10:34 am

Re: Kids 4 year college money .. is this a good idea ?

Post by greg24 »

In our extended family, we haven't had issues with the next generation slacking off if their college is paid for. They all want to achieve, they want to do well, they want to succeed, they want to minimize what their parents are spending.
mighty72
Moderator
Posts: 1232
Joined: Fri May 04, 2018 11:22 pm
Location: Somewhere in the West

Re: Kids 4 year college money .. is this a good idea ?

Post by mighty72 »

If you want to do it then why not let them take a loan and if you feel they are not doing financially well then help with the loan.

Yes, there is a cost to this plan (interest rate) but there is also opportunity cost when you take the money out of your savings to make the loan.

Just an idea. Otherwise, I agree with Klangfool.
User avatar
JoeRetire
Posts: 10286
Joined: Tue Jan 16, 2018 2:44 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by JoeRetire »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm goal here is not to give them free money
Well, a loan would obviously accomplish that.
and make them value the money + education more
You know your kids and maybe a loan would be necessary to accomplish this goal for them.

Not what I would do.

With my sons, we paid for their college educations. The deal was that they would work hard and we would make sure they graduated with no debt.
It worked out great for us. They clearly valued the money and their educations.
I love a good nap. Sometimes it’s the only thing getting me out of bed in the morning.
Flashes1
Posts: 1178
Joined: Wed May 07, 2008 7:43 am

Re: Kids 4 year college money .. is this a good idea ?

Post by Flashes1 »

I feel good paying the equivalent of what State U's in-state tuition, room & board ----anything beyond that is their responsibility......with the condition that they do the same thing for their kids. That what my parents did with me.
Topic Author
lazybones18
Posts: 42
Joined: Thu May 14, 2020 9:31 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by lazybones18 »

BernardShakey wrote: Mon Nov 22, 2021 6:03 pm
lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
This is not what I would do. It sounds as if you don't have confidence in your kids' ability to value their education, work hard, and do well. I mean, what do you think they would do with a paid for college education ?
they might blow out their money on fancy unwanted stuff if they don't have any college debt to pay. I graduated with a decent amount of debt and it made me more careful with what I do with my money.

i do agree with other posters about mixing money and family. its not a good recipe. loan money to my kids for college education might strain my invaluable relationship with them

this idea was derived from my own journey. if I didn't had student loans and other commitments when I graduated, I would have blown all that money away on unwanted stuff. Paying back for my education was tough but it helped me with value education & money a lot more.
Topic Author
lazybones18
Posts: 42
Joined: Thu May 14, 2020 9:31 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by lazybones18 »

Flashes1 wrote: Mon Nov 22, 2021 7:41 pm I feel good paying the equivalent of what State U's in-state tuition, room & board ----anything beyond that is their responsibility......with the condition that they do the same thing for their kids. That what my parents did with me.
if they go to a expensive private school and you have the money. you wont pay for it ?
ClaycordJCA
Posts: 392
Joined: Sun Aug 09, 2015 11:19 pm
Location: SF Bay Area

Re: Kids 4 year college money .. is this a good idea ?

Post by ClaycordJCA »

If OP has more than one child, I expect any differential treatment between siblings because of their respective financial performance or OP choosing or not choosing to forgive their loans could cause significant resentment and alienation. OP, I think you are playing with fire.
BernardShakey
Posts: 488
Joined: Tue Jun 25, 2019 10:52 pm
Location: CA

Re: Kids 4 year college money .. is this a good idea ?

Post by BernardShakey »

lazybones18 wrote: Mon Nov 22, 2021 9:57 pm
BernardShakey wrote: Mon Nov 22, 2021 6:03 pm
lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
This is not what I would do. It sounds as if you don't have confidence in your kids' ability to value their education, work hard, and do well. I mean, what do you think they would do with a paid for college education ?
they might blow out their money on fancy unwanted stuff if they don't have any college debt to pay. I graduated with a decent amount of debt and it made me more careful with what I do with my money.

i do agree with other posters about mixing money and family. its not a good recipe. loan money to my kids for college education might strain my invaluable relationship with them

this idea was derived from my own journey. if I didn't had student loans and other commitments when I graduated, I would have blown all that money away on unwanted stuff. Paying back for my education was tough but it helped me with value education & money a lot more.
Yes, I can understand the desire to save them from themselves if you had that spendthrift tendency. On the other hand, I really cannot understand incentivizing the kids such that if they do well you make them pay you back, but if they aren't doing well they don't have to pay you money. That seems backwards. It's incentivizing them to not be successful after college.
An important key to investing is having a well-calibrated sense of your future regret.
lazynovice
Posts: 2206
Joined: Mon Apr 16, 2012 10:48 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by lazynovice »

Paying for education is one of the few ways you can transfer assets to them above the annual exclusion amount without encroaching on your estate tax exemption. Maybe you don’t care about that yet or maybe you aren’t worried about it at all.

If the estate tax limits drop in 2025 to $6 million and only increases with inflation thereafter, do you think you will want to start gifting to children and grandchildren? If so, you’ll regret this plan.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
Goal33
Posts: 1797
Joined: Sun Apr 12, 2015 12:30 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by Goal33 »

Pay for it or don’t
Late2Brake
Posts: 23
Joined: Wed Jul 07, 2021 3:32 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by Late2Brake »

I paid for 4 years of my sons education, two years in community college and 2 years at an expensive private school. He graduated magna cum laude and I could not be more proud of what he's accomplished.

I was and still am very happy I was able to get him started in his life debt free.
exoilman
Posts: 824
Joined: Wed Oct 15, 2008 1:38 pm
Location: New Jersey

Re: Kids 4 year college money .. is this a good idea ?

Post by exoilman »

Reference +1
getthatmarshmallow
Posts: 1021
Joined: Mon Dec 04, 2017 9:43 am

Re: Kids 4 year college money .. is this a good idea ?

Post by getthatmarshmallow »

lazybones18 wrote: Mon Nov 22, 2021 9:57 pm
BernardShakey wrote: Mon Nov 22, 2021 6:03 pm
lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
This is not what I would do. It sounds as if you don't have confidence in your kids' ability to value their education, work hard, and do well. I mean, what do you think they would do with a paid for college education ?
they might blow out their money on fancy unwanted stuff if they don't have any college debt to pay. I graduated with a decent amount of debt and it made me more careful with what I do with my money.

i do agree with other posters about mixing money and family. its not a good recipe. loan money to my kids for college education might strain my invaluable relationship with them

this idea was derived from my own journey. if I didn't had student loans and other commitments when I graduated, I would have blown all that money away on unwanted stuff. Paying back for my education was tough but it helped me with value education & money a lot more.
But your loan wasn't premised on the idea that you'd not pay it back if you were struggling. This is the problem with the diy loan terms. Inadvertently you've created a reason for your kid not to so well, and if you have more than one, resentment (dad & mom made a loan so I worked hard to pay it back, but it became a "gift" to sibling because they were lazy.). Either give the money or don't - but leave the lending to the pros.
User avatar
Wiggums
Posts: 4519
Joined: Thu Jan 31, 2019 8:02 am

Re: Kids 4 year college money .. is this a good idea ?

Post by Wiggums »

We saved for college since they were young. Now our children are paying college expenses from their brokerage account and working to gain experience. They invest their W2 income and are off to a great start.

We know many parents who have failed to save for college. Throwing up barriers for children means that only the most motivated will succeed or complete higher levels of education. We have seen many kids drop out. Guess what? Children with low or no income move back home. Parents should guide their children and push them to do their best. At 17, they are trusting you have their back instead of being a banking transaction. Wouldn’t a lender lender requirer you to co-sign?
Last edited by Wiggums on Tue Nov 23, 2021 9:33 am, edited 5 times in total.
Investors need to be better informed about the costs they pay. “High fund fees can be hazardous to your wealth in the same way that high calories can be hazardous for your health.”
z3r0c00l
Posts: 2636
Joined: Fri Jul 06, 2012 11:43 am
Location: NYC

Re: Kids 4 year college money .. is this a good idea ?

Post by z3r0c00l »

Why not have them go to a college that doesn't cost an arm and a leg?
75% Global Stocks / 25% I-Bonds
KlangFool
Posts: 22810
Joined: Sat Oct 11, 2008 12:35 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by KlangFool »

lazybones18 wrote: Mon Nov 22, 2021 9:57 pm
this idea was derived from my own journey. if I didn't had student loans and other commitments when I graduated, I would have blown all that money away on unwanted stuff. Paying back for my education was tough but it helped me with value education & money a lot more.
lazybones18,

1) When I graduated college, I help paying for my younger sister's college education.

2) Facing starvation during childhood, blowing money away on unwanted stuff is not a luxury that we can afford.

3) My son and daughter saved 20K to 30K each since they were born. They were given a few hundred each year. I do not need to worry about they wasting their money. I paid for their college education and they graduated with their 20K to 30K of their own savings/investment.

To each its own.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
User avatar
winterfan
Posts: 481
Joined: Mon Jan 05, 2015 11:06 am

Re: Kids 4 year college money .. is this a good idea ?

Post by winterfan »

dukeblue219 wrote: Mon Nov 22, 2021 7:07 pm I wouldn't.

If anything you're punishing them for working hard and getting a good job by forcing them to pay you back. Someone who can do the first part isn't going to learn an even stronger work ethic by having to pay back their parents.

A slacker who drops out of college and has their loan forgiven by parents isn't motivated anyway.

Let your kids start life on a clean slate. It's hard enough to get your feet under you as a 22 year old anyway.
Totally agree. I went to a school with a lot of kids from well-to-do families. I didn't know anyone who slacked off because they're parents paid their tuition. I don't want my child to start out her adult life indebted, to her parents or otherwise.
User avatar
CrazyCatLady
Posts: 287
Joined: Mon Apr 30, 2018 9:19 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by CrazyCatLady »

lazybones18 wrote: Mon Nov 22, 2021 9:57 pm
BernardShakey wrote: Mon Nov 22, 2021 6:03 pm
lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
This is not what I would do. It sounds as if you don't have confidence in your kids' ability to value their education, work hard, and do well. I mean, what do you think they would do with a paid for college education ?
they might blow out their money on fancy unwanted stuff if they don't have any college debt to pay. I graduated with a decent amount of debt and it made me more careful with what I do with my money.

i do agree with other posters about mixing money and family. its not a good recipe. loan money to my kids for college education might strain my invaluable relationship with them

this idea was derived from my own journey. if I didn't had student loans and other commitments when I graduated, I would have blown all that money away on unwanted stuff. Paying back for my education was tough but it helped me with value education & money a lot more.
I actually agree with this. I ended up with almost $300,000 in loans (most at 8.5%) that took 17 years to pay, but it sure did make me value money and my education, and makes saving more than 50% of my salary a breeze now :)

I also agree with everyone who said you are borrowing trouble if you loan them money with strings on repayment though. To teach them the lesson, maybe let them get some Stafford loans and pay for the first 6 months or a year (learning how to budget to have enough to make payments) and then you can pay them off once they've gotten a taste of what it is like?
stoptothink
Posts: 10462
Joined: Fri Dec 31, 2010 9:53 am

Re: Kids 4 year college money .. is this a good idea ?

Post by stoptothink »

lazybones18 wrote: Mon Nov 22, 2021 9:58 pm
Flashes1 wrote: Mon Nov 22, 2021 7:41 pm I feel good paying the equivalent of what State U's in-state tuition, room & board ----anything beyond that is their responsibility......with the condition that they do the same thing for their kids. That what my parents did with me.
if they go to a expensive private school and you have the money. you wont pay for it ?
I won't, unless they can convince me that there is a real tangible benefit to the more expensive school. My kids have enough in their 529s to cover 4yrs at the local U (one of the cheapest in the country), unless it is MIT/Caltech or possibly HYPS, wife and I are in total agreement that we are done funding their college education. I would much rather save that money to help them buy a home later on than have a "college experience" that likely has no benefit to their development as a successful and self-sufficient member of society (over local U).

Signed, undergrad from elite U who got $0 in help from parents (neither did my wife).
User avatar
TomatoTomahto
Posts: 13278
Joined: Mon Apr 11, 2011 1:48 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by TomatoTomahto »

lazynovice wrote: Mon Nov 22, 2021 11:46 pm Paying for education is one of the few ways you can transfer assets to them above the annual exclusion amount without encroaching on your estate tax exemption. Maybe you don’t care about that yet or maybe you aren’t worried about it at all.

If the estate tax limits drop in 2025 to $6 million and only increases with inflation thereafter, do you think you will want to start gifting to children and grandchildren? If so, you’ll regret this plan.
+1

We scramble to find ways to (fairly and legally) transfer to our heirs, and really there isn’t much that can be done other than gifts to the annual limit.

We actually went entirely the other direction than OP. For example, other than for expenses directly related to discretionary actions (eg, trip to Europe with GF), we didn’t want children’s earned income from internships to offset any of their living expenses. So, one of our kids graduated with a high 5 digit amount in his brokerage account. Not for nothing, he subsequently launched admirably.
I get the FI part but not the RE part of FIRE.
User avatar
Matahari
Posts: 604
Joined: Sun Mar 08, 2015 3:09 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by Matahari »

shess wrote: Mon Nov 22, 2021 6:40 pm
If there's any relationship I want to foster with my kids, it is not the kind of relationship I have with my bank. Look at your finances, and draw lines you can live with and stand behind, rather than trying to inject artificial constraints into the system. It's bad enough when your kids suspect you are doing something for artificial reasons, it's worse when you are actually doing it for artificial reasons.

I'm not saying you MUST pay your kids' college. I'm just saying pay it, or don't pay it, don't try to make it their fault.

As far as whether your kids will "value" their education more, that's a 20-year project. Either they are that kind of kid, or you raised them right, but if they aren't that kind of kid or you didn't raise them right, structuring your college payments isn't going to suddenly turn things around.
You said everything I felt like saying. Even as one tries to make good financial decisions in one's life, one's relationship with one's children should not viewed in financial or commercial terms. Decide whether and what you want to contribute to their college education, let them know well ahead of time so that they can deal with it. If you can afford to help them, don't make their formative young adult years harder than they need to be by imposing a "repayment" scheme that is based on your future and subjective judgment.
User avatar
sergeant
Posts: 1783
Joined: Tue Dec 04, 2007 11:13 pm
Location: The Golden State

Re: Kids 4 year college money .. is this a good idea ?

Post by sergeant »

OP, I do not like your idea but you know your kids and what will work best for them.

We paid for four years of college for both kids. One went to State U, the other to an expensive private college. Both were responsible for their graduate degree. State U kid got the military to pay for it. Private college kid took a job with 95% tuition reimbursement to pay for hers.

Both kids worked while in college. Wife wanted to have them start paying for books since they were working. I nixed that idea as I thought it penalized their choice to work. Both graduated with no debt and over 30k in their savings account.
For the ashes of his fathers, And the temples of his gods. | Pensions= 2X yearly expenses. Portfolio= 40X yearly expenses.
MDfan
Posts: 651
Joined: Tue Oct 18, 2016 7:32 am

Re: Kids 4 year college money .. is this a good idea ?

Post by MDfan »

We paid 100% for our 3 kids' college educations. Two of them have good jobs and are doing well. The other is a senior and is well on her way to a good job. So they did ok with the free money. I never considered having them pay me back
User avatar
TomatoTomahto
Posts: 13278
Joined: Mon Apr 11, 2011 1:48 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by TomatoTomahto »

OP, what’s the move if one of the kids says, “thanks, but on second thought, I won’t need the loan as I won’t be attending college?”
I get the FI part but not the RE part of FIRE.
Broken Man 1999
Posts: 6819
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, near Champa Bay !

Re: Kids 4 year college money .. is this a good idea ?

Post by Broken Man 1999 »

MDfan wrote: Tue Nov 23, 2021 6:20 pm We paid 100% for our 3 kids' college educations. Two of them have good jobs and are doing well. The other is a senior and is well on her way to a good job. So they did ok with the free money. I never considered having them pay me back
Same here. It never once crossed my mind for any of our three daughters to pay me back.

I paid for graduate degrees for two, one chose not to attend graduate school. It was offered.

OP, they are your children, and your dollars, so, your decision. Frankly, your rule for repayment seems to be a bit arbitrary.

How do you determine doing financially well? If one makes a $100k, and the other makes $60K, are they both doing financially well? Or, only one?

Do you have any metrics in mind that you will use to determine whether they pay you back?

Me, I wouldn't take one step down your road.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
ivgrivchuck
Posts: 984
Joined: Sun Sep 27, 2020 6:20 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by ivgrivchuck »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm thoughts ?
Instead I would propose something like:

- Pay a certain amount (20k?, 50k?, 100k?, 200k?) of education per each kid. Let them take care of the rest.
- Pay a certain percentage (30%? 50%? 70%?) of education costs (perhaps up to a certain amount)

That lets you to be supportive and at the same time they have a skin in the game.

My current plan (it's still in the works, my oldest starts the college in 3 years) is to pay up to $100k education related expenses per child. They need to take care of the rest. If they achieve a degree for a cheaper price, I'll pay the difference to them at the graduation day.
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
dogagility
Posts: 1873
Joined: Fri Feb 24, 2017 6:41 am

Re: Kids 4 year college money .. is this a good idea ?

Post by dogagility »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
Us: two mid-twenties kids; we fully paid for their undergraduate degrees; both very successfully launched.

IMO, having a internal goal tied to the education and having instilled the benefits of an education during childhood is more motivating.

Playing games with my kids by placing them in debt isn't a relationship I choose to create with them.

Your mileage may vary; to each, their own.
The more flexibility you have the less you need to know what happens next. -- Morgan Housel
Leesbro63
Posts: 7449
Joined: Mon Nov 08, 2010 4:36 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by Leesbro63 »

Reward the kid who didn’t monetize his education but punish the one who did? Huh?
Arabesque
Posts: 214
Joined: Mon Jan 08, 2018 9:56 am

Re: Kids 4 year college money .. is this a good idea ?

Post by Arabesque »

Back at the end of the 1800's, my great grandfather didn't want my grandfather to finish high school. He wanted him to work on the farm and help support the family. My grandfather slept in a neighbor's barn and finished high school. He went to college on scholarship and became a prominent scientist. Now I have a little sympathy for my great grandfather who had too many kids, but in the end, all anyone remembers about him is that he didn't want his brilliant son to finish high school.

If you can afford it, just pay for the kids' college. It is the twenty-first century, there is more to know, and college graduation is much like high school graduation was.
User avatar
Michael Patrick
Posts: 201
Joined: Wed Dec 19, 2018 10:25 am
Location: Madison, WI

Re: Kids 4 year college money .. is this a good idea ?

Post by Michael Patrick »

I want my daughter to not start her life as an adult under the weight of debt. We are paying for her college.

As far as teaching her how to value money and not be a spendthrift, we are doing that by example. That's how we live our lives.
RichL
Posts: 3
Joined: Tue Jun 22, 2021 5:59 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by RichL »

When I was in college, one of my friends had a “cash for grades” program with their parent.

The student paid the tuition up front each term. At the end of the term, if they had achieved a minimum GPA the parents reimbursed tuition & fees in full for that term. I remember the GPA level was low, like enough to stay off academic probation.

This worked, but both kids were intelligent and motivated. I worry even that plan has risk of making the parents the “bad guys who killed the students dreams”.
BoglePablo
Posts: 74
Joined: Sat Jan 28, 2017 12:53 pm

Re: Kids 4 year college money .. is this a good idea ?

Post by BoglePablo »

lazybones18 wrote: Mon Nov 22, 2021 5:47 pm Instead of just paying for my kids 4 year college why don't I lend the same money to them

If they are doing financially well after college, they pay me and I can invest the same money for my grandkids, use it for myself or even forgive it depending on the circumstances
if they are not doing so well financially, I can chose to forgive the money I gave them for college

goal here is not to give them free money and make them value the money + education more

we all know what happens when you give people free money :sharebeer

thoughts ?
A very "personal" aspect of personal finance discussions!

If that is the plan you feel is best for you and your family: go for it

I grew up the child of immigrants
my parents' parents struggled and made sacrifices to send their kids to Uni
My parents struggled and made sacrifices to send their kids to Uni
I will do my best to pay for my kids' Uni

As someone else may have also implied: I don't want the banker mentality within my family; there will be enough of that in the world

I will give my kids as much of a head start as I can afford, and i strive to parent them well enough that it doesn't ruin them

I read somewhere about how the library is one of the few bastions of society "...where you are not expected to buy anything."
Somehow this sentiment seems related to this discussion
User avatar
Harry Livermore
Posts: 959
Joined: Thu Apr 04, 2019 5:32 am

Re: Kids 4 year college money .. is this a good idea ?

Post by Harry Livermore »

We saved for all three of our kids to go to college... as much as we could, without jeopardizing our retirement plans. I happily wrote checks for 4 years for my older son's tuition, room, and board at a relatively pricey private college, and my daughter's similarly-priced (out of-) state u. Our younger son is still in high school.
I consider my gift to each of them- a college education with relatively small federal loans that they are responsible for- a gift, from a place of love as their father... no different than juggling things so that they could have a nice (modest) home, with heat and hot water, an excellent public school district, clothing and food, travel and trips to museums and ball games, time with their grandparents, help with their homework.
It's the capstone in launching them as fully functional adults. It would not be my personal choice to turn that gift into a sort of stick-and-carrot tool to "ensure" that they succeed. But just because that's my choice does not mean the OP can't try it...
Cheers
Post Reply