A few housekeeping things right off the bat: The below stance has nothing at all to do with the validity of college savings plans themselves; the investments, management fees, etc. The opinions expressed here are based entirely on the idea that your money could be, and should be, better spent. Got it? Good. Here goes:
While they're not a guarantee, the Mrs. tends to enjoy a pair of handsome bonuses each year. From them we generally budget for a $1,000 contribution to each of the girl's 529 College Savings Plans. That's a grand sum of $2,000 to 529 college savings plans every 12 months. Not last year though, and none for 2012 either. Instead, we used the two grand for 2011 to beef up the five-year old wooden swing set that calls our backyard home. As investments go, this wasn't even close.
How does an enhanced kiddie play structure compare against money for higher education you ask? Easy. With the new giant rock wall, fire station pole, and 14″ swoop slide my two girls will spend the next half decade challenging themselves, their bodies, and their minds. With the two-story "treehouse" skybox, they'll enjoy even more years of outdoor play with each other and with friends telling stories, pressing leaves, scaring each other, writing bad poetry, doing their version of improv comedy, writing songs, thinking, and dreaming. I wouldn't be surprised if there is some making out in there in a number of years. Better there then behind the mall dumpster, I say. What they'll each take away from the countless hours of fun ahead of them will trump the single three-credit class+books their $1,000 would get them if they were going to college RIGHT NOW! Forget about 11 years from now for the Bear or 14 years for the Mouse! That'll probably cover their parking permits for one semester. And as they say on TV infomercials, "BUT WAIT, THERE'S MORE!"
Let me make the case that you shouldn't save one penny for your kid's college tuition. Don't even open a 529 college savings account. Unless you've got $10,000 or some eye-popping figure to toss into that bucket every year (and if you do, you can probably also do what I'm about to say), Don't. Even. Bother. Instead, take all the money you think you want to stash away for college and do some or all of this every single year from now until your children are college age:
- Spend a week traveling with your child -- in Europe, road trip across America, rail through Canada. Pick a different spot every year and go explore, learn, then speak, a new language, taste new foods, assimilate into the culture of the region.
- Buy an old car/boat/house and rehab it together.
- Enroll in cooking classes together.
- Subscribe to a local theater season of plays, musicals and acting classes.
- Try to see every Major League Baseball ballpark, or road trip to a cluster of minor league parks.
- Build them a book nook in a corner of your home.
- Get pampered at a spa together.
- Let your child take piano/guitar/trumpet/singing/dancing/gymnastics lessons. Maybe give that old instrument another try yourself, and learn together.
- The key word in all of that: TOGETHER.
If you commit to this plan early on in your child's life she will be, by the time she is college-age, cultured and will have seen, heard, touched, and experienced more than most humans will in their entire life. Your child will have lived a life that no collection of textbooks could broach. She will be smarter, wiser, more humane, more global, and more interesting than any 22-year-old tossing a hat into the air on graduation day, and WAY more so than a random 18-year-old still undecided on a major. She will be more self-aware, more observant, more compassionate, and closer to you, her parents. She'll be thankful, humble, and adventurous. [Switching gender pronouns now!] He will be ready to take on any challenge in his adult life in a way that a student simply confined to walls, dorms, book learning, and classrooms won't be/can't be. And guess what: he can still go to college! He can work for it which will make the experience longer and more challenging, yes, but also more satisfying and ultimately more rewarding. How many fresh-faced 18-year-olds waste that first semester or first year of college trying to figure out what they want to be, how to be, who they are, and how to survive in the real world? Imagine that feeble attempt at instant assimilation and self-discovery and the wasting of 18 years of your saved money.
Maybe this can be read as a case against college itself; I do think it's terribly overrated for professions outside the highly technical. But there can be a lot of value in education -- probably more value when one is educated at 28 as opposed to 18 -- but value nonetheless. Really, this is a case against the relatively new idea that we must -- MUST -- stash money away for our children's higher learning expenses. That we are doing them a disservice if we don't or cannot. I contend this idea is a bit of a marketing ploy by the financial industry desperately searching for new ways to get inside our wallets. I can make a similar argument against retirement savings, but that's a topic for another day.
Think about this scenario for a minute:
- You have two children.
- You save $1,000 per child (not a small amount) every year of their lives until each turns 18.
- You get a 5 percent return on your investment, on average, every year.
- After 18 years you have roughly $29,500 per child saved for college. That's not too shabby. Congratulations!
- $29,500 is likely to net each child just ONE (1) year of school, books, and room and board at a public university 18 years from now.*
I'll argue that what the original $18,000 investment could have given your child over 18 years is more valuable, enjoyable and memory-making than one year of college ever could be. Plus, you won't ever have to sweat the 529 plan balance bobbing along with an increasingly volatile market. But the real kicker is that your children can have that year of college too, anytime they want. But they'll never, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever get the precious time with you again. This much is absolutely certain. And priceless.
A child with 18 years of experience in their front pocket is more likely to know themselves and know what they might like to learn more about in an academic setting and maybe know what profession they'd like to pursue. College will then enhance their accumulated life learning and feel more meaningful. Higher learning is more substantial and powerful in its effects when it is earned. I've met too many people who've spent $100,000 of their parents money or who are saddled with hefty student loans themselves to get their history/English/philosophy bachelor's degree only to spend their next decade in a call center cubicle. What the hell was the point? To think of all the experiences they could have had alongside their parents. An opportunity gone forever.
Not for us. We are using what would be their 2012 contributions to a 529 plan on airfare to Barcelona during the Bear's Spring Break week, a vacation that will take us to three countries (Spain, France, Andorra) over 10 days. That's $683 to USAir instead of UPromise, the dividends from which will be paid in Euro instead of greenbacks but the long term gains are expected to be much higher.
The above is just a little something to think about, a not often heard counterpoint to the constant din of "save, save, save" new parents hear regarding their child's future education. I've seen commercials that are nothing more than a cleverly disguised parental pissing contest about which couple is saving the most for their new baby. Like we need another thing to compare against each other.
Dismiss this if you wish. It's totally your call. I'll be off doing something interesting with my kids if you need me.
*I have no special insight into the future of college costs but it doesn't take much research to discover what prices were 18 years ago and to quickly calculate what they may be 18 years from now.
This was originally published on The Good Men Project: Check it out here.