How to get a "rich" kid to be thrifty about college choices

Parents Forum
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<p>" if son gets into one of his reaches that we/he feels will be a good intellectual fit, we will probably ante up the $200,000. We won’t, however, guarantee we will pay for graduate school.</p>

<p>If he get gets into one of the reaches that we feel is only a so-so fit, we will probably try to persuade him to take one of the safeties and guarantee full payment of grad school and maybe some money for a down payment on his first house."</p>

<p>I wonder how much this helps the “be thrifty” dilemma. My kids want to know “our rules” on this subject, and they want to know the rules of the game going in. (This mindset applies to everything, not just the college payment discussion.) They don’t want or like the rules changing in the middle of the game, depending on the schools that accept them. If this, then… if that, then… In that case, there are no rules; it’s too subjective.</p>

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<p>Make the student review budgets – Family now; Parents future; Student future. The student may be “smart” academically but has never seen the true cost of things. </p>

<p>It doesn’t sound to me that you are set on the in-state option, only that you want financial impact to be an important part of the decision process. Important enough that the student find, like & apply to state schools.</p>

<p>For a teen who has been living off parents without being an involved player in the family budget many items may never have occurred to the student. Healthcare for example – leaving the politics out of it – Health care costs are difficult to accurately budget for as many Employers shift costs to employees & many parents nearing retirement no longer have the guaranteed coverage at retirement age. </p>

<p>I second the Student should pay for enough of college that the student sees an impact. </p>

<p>I would take it a step further & have student make a budget estimate NOW for age 25. The budget estimate is a concrete item to refer to when making the final college choice – Does the student really want to be 25 & have to live at home to cover student loan payments?</p>

<p>Without the budget a student that has to pay for college may opt for loans without realizing the impact.</p>

<p>Best of luck!</p>

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<p>In our house education was not an area we chose to use to demonstrate lessons in thrift. It is our belief that if we could afford to let the children choose their ideal learning environment, it was a gift we wanted to give them.</p>

<p>Had they not all been hard workers who did their academic best always, we might not have seen it this way.</p>

<p>We do have lots of thrift expectations/demands that center on things like clothes, entertainment, toys and extras, but we were happy to let them choose schools without the cost factor.</p>

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<p>“Wow - I could have written this post. Thank you,”</p>

<p>Me too, but not as well!</p>

<p>Our D’s fund tanked between applications and acceptances, and the acceptance she ended up going with was a HUGE surprise, a HUGE reach. We had primarily focused on in state publics. We had talked about her expected contribution, but in her freshman year, didn’t push it. None of us really knew what to expect. </p>

<p>Since then, the fund tanked even more, younger brother will graduate and attend college ( wasn’t sure that he would ), and the plan needed to change.</p>

<p>I ended up offering a Stafford Loan “subsidy scholarship” for the unsubsidized Stafford we told here to take if she could not/did not earn the equivalent over the summer. Mostly to cover the non-tuition, non-fee, not room and board part of the cost of attendance.</p>

<p>I don’t think either are academic hard workers who do their academic best always, but they work VERY hard at their EC’s, and would choose their colleges based on that.</p>

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<p>Take your child to the local luxury car Dealer. Find 4 cars near each other that have an MSRP just under $40K. Explain to him that you could send him to the public school, drive 3 of them off of a cliff and give him the 4th and still come out ahead. </p>

<p>Then ask him whether he thinks the experience at the private would be worth giving up 1 (fill in luxury car names) much less 4 of them.</p>

<p>If he does think the private education is worth the vehicles, then he must be either a dedicated student or knows nothing about fine automobiles.</p>

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<p>The OP wrote:</p>

<p>"This seems like a bit of whiner question when many on CC are faced with severe financial constraints (I am not downplaying these concerns), but it is a dilemma for us, although it may seem trivial, perhaps to others. My apologies in advance if this question is seen as offensive or insensitive to others on CC. "</p>

<p>I don’t think this seems any more trivial than the students and parents who post about being disappointed in their 2290 SAT score and 4.0 gpa, which will keep them out of an ivy. Whatever your/their/my concern is, that’s important, and if you/they/we choose to post a question, there’s nothing trivial about your concerns. One of the great things about CC is the ability to anonymously air your fears and concerns without worrying about what anyone will think of you.</p>

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<p>My concerns with that strategy (for myself; obviously you get to do what you like with your money) are two-fold:

  1. I don’t want a kid choosing a less expensive college for the sake of the fact that it is less expensive - it needs to be the best college for her circumstances / interests.
  2. I don’t see the money I’ve set aside as “their” money. It’s ours. I have twins; if one attends State U at $25K and the other attends Elite U at $50K, they each get funded, but they don’t get to keep the change. Any more than if one twin took ballet lessons that cost $X and one twin took violin lessons that cost $2X, the first twin doesn’t get to keep the change. It’s my money, not theirs - what they don’t spend goes back to *my retirement fund.</p>
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<p>Well, we have taught our kids that fine vehicles depreciate most when you drive them off the lot.</p>

<p>This year I bought a $42,000 car for $14,000. It was 3+ years old and not not high mileage. (<40K.) I would hope my kids would say the cars were not good value.</p>

<p>It is the car I have always wanted to own. Not Mercedes or Beamer – a Saab convertible (hey, my doc told me I needed vitamin D). But cars do depreciate.</p>

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<p>Yes, I would hope my kid would pick the best school instead of 4 new cars.</p>

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<p>fineartsmajormom: Just one thing</p>

<p>If you can afford then only let the child go to the best school possible otherwise be upfront with the child about the financial realities and let him/her make the decision.
There is no way you will ever be able to justify the cost/value of any school. </p>

<p>A saving of $80000 is worth only if you or your child is taking a loan to pay it. depending upon what two schools your are comparing even that might not be worth. </p>

<p>Money sitting in bank never be worth enough to suppress child dream school. So if you can afford send the child to the best possible school.</p>

<p>I reached to $80000 as difference in $50,000 vs $30,000 school. The difference might be upto $120,000 between the lowest in state to highest private school.</p>

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<p>My point was to give the kid an idea of what $40K really is using something of value to him. Really, most kids have a difficult time understanding the value of large sums of money (which they’ve never had to work for).</p>

<p>And yes, the $50k+ school might be better than the public, but how much? OP did not provide the difference. And that difference may be measurable (in terms of salary earned coming out of school), partially measurable (improved likelyhood of graduating in 4,5, or 6 years), or completely immeasurable (pure intellectual enjoyment).</p>

<p>And speaking of measurable differences, that expensive undergraduate degree depreciates very quickly in the job market. It could very well be worth an extra 10K to 20K per year in starting salary. However, for the job s/he gets 5 years from now, where the UG degree came from may be meaningless to the hiring employer, unless there is an old-boys network at work (and that takes some care and feeding to develop). Nobody has cared where I got my degree from in decades. So perhaps degrees depreciate much like the 4 luxury cars… </p>

<p>Another question to ask in the value equation, “Is s/he going to make the optimum use of this institutions resources?” We all get to oooh and aaah at the nice facilities and the like when we take college tours, but a high percentage of students at most schools don’t even make use of these resources.</p>

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<p>This is much the same as in our house. However as I have said on another thread, each family must make it’s own choices.</p>

<p>I am glad that you had that middle part in about working hard. That was a key part of our decision to let D choose a school without financial restrictions. She would have had her choices limited if she had not put forth her best effort.</p>

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<p>As always, great advice. I think we know our children and their values. My son very thrifty, and grew up watching his mom work hard. The education in his tech fields may have been duplicated at in-state, but not the peer group. He got small jobs immediately, then better paying ones, and always worked summers. He has to be urged to spend on food and clothes.
If I had a different child, then decision would have been different. OP’s Q is good, but ultimately, will weigh heavily on the child’s character.</p>

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<p>I took the several schools (private and state) that my D was interested in, compiled the COA, and offered merit packages. We proposed to pay the rough equivilent of Sate school COA and allowed her to play with the balances. If she wanted a private, she would incur the add’l debt load. This calculator really “brought it home” as it provides realistic affordability to the student.
<a href=“http://www.finaid.org/calculators/undergradadvisor.phtml[/url]”>http://www.finaid.org/calculators/undergradadvisor.phtml&lt;/a&gt;&lt;/p&gt;

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<p>Pizzagirl#27: I understand your point. In our case, she is an only child, and mentally the money has already been gifted to her. The retirement account is separately funded. I also know my D and how much (or how little) she values money. Also, this is a very hypothetical issue for us since all the colleges on her list will cost approximately the same (give or take 10K/yr).</p>

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<p>Education never depreciates and so is the value of your degree. The problem is that you need to understand that it doesn’t do magic. I’ve always told DD that degree will just provide a quick interview but in the end whether or not she gets the job depend on the interview and how much knowledge she has.
The college does matter but you need to have the qualities to go with it. If two equally qualified candidates compete for the job then the Stanford grad will always beat UCB. Whether it is right after the college, 10 year after the college or for the CEO job.
But the emphasis is on the equally qualified candidates which seldom happen. A UCB grad might be more relevant for the job or have more experience etc.</p>

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<p>1) realize that the fact that a college costs $50,000 a year today does NOT mean it will cost you $200,000 over 4 years. costs go up each year. by a lot. by senior year, annual cost could well be $60,000 or more. (only a few years ago the figure being thrown around was $40,000 a year – that went up to $50,000 within what seemed like the blink of an eye).</p>

<p>2) quite honestly – its a little late now to get across all that you’d like to – i just hope that for others reading this thread, they’ll understand that teaching a child about financial reality is a long hard taught lesson – and discussions should start well before senior year of hs.</p>

<p>3) this is just the beginning of hopefully your student learning about financial reality. he may simply not be ready to make what you might consider a financially responsible decision at this point – especially given the fact that you previously kept telling him you’d pay for undergrad and especially since you yourself have mixed feelings on the issue and probably are sending mixed signals.</p>

<p>i think the first thing is that you and your h have to decide is what makes sense for the two of you and what you want – you can’t expect him to make a decision that you yourself aren’t able to make.</p>

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<p>I’m not offended at all by the question posed but I am one of those parents who could not offer my child the same choices that your children are being offered so I come to this discussion from a different perspective; simply an honest reflection.</p>

<p>One thing I don’t quite understand is what the child is really learning about thriftiness and value if you repay their loans upon graduation. If they don’t have to live with those loans and see the impact of those loans on the rest of their life decisions such as buying a home, I fail to see the point. They still get to attend the school of their choice and begin their lives debt free. End result is the same as if there were no loans in their names to begin with. Yes, I get that they don’t know the loans will be paid off but it’s not as though those loans are making an impact on them anyway while they’re in school. An argument could even be made that by paying the loans off, you’re actually demonstrating to them that you are there to bail them out if they find themselves in a financial dilemma. Don’t get me wrong, I wish I could give my daughter more than I can so I’m not saying you shouldn’t pay for them to attend the school of their choice if it’s financially within reason for you. I just don’t see what the scenarios given accomplish. </p>

<p>My other thought is as you expect them to be thrifty by contributing to the cost of tuition and fees, how will that translate to quality of life elsewhere, as in spending money, credit cards, type of automobile, clothing, and vacations or travel abroad. My only point is that the lesson is lost if they’re carrying a loan that will be repaid for them while driving a luxury auto and shopping with dad’s credit card. Sure they may have a part time job or work/study but most college kids do anyway and it’s not the same when you have to use that money to eat or pay rent and there’s nobody else to pay it for you.</p>

<p>Finally, everybody knows the economy is tough right now, but I just want to reiterate that there are public school grads who are getting great jobs (and those who aren’t) and there are ivy grads who aren’t getting jobs (and those who are). I say this only because I have family members in both categories, all near the same age, and the ivy grads are struggling too. So more expensive doesn’t always mean better.</p>

<p>If you want your children to attend a prestigious school and you have the money to pay for the prestige and that’s important to you, then do it. If, on the other hand, you want your child to attend a school of lesser prestige on principle so they don’t grow up feeling a sense of entitlement, then define for them what your parameters are and which schools on their list you’re comfortable with them attending from the perspective of cost and level of status. Anything else just seems like a game, imho.</p>

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<p>My point about the cars is that nothing has an “absolute” value except cash. Diamonds, stock, land, etc. all change. And inflation radically alters the “value” of cash, too.</p>

<p>As for an education depreciating in the job market, one thing I think we’re paying for is the experience in the here and now, something that can never alter. But then, I do have the kind of kids who are academic by nature and value what they’re learning for itself, whatever their job outcome.</p>

<p>My S thinks reading THE ILIAD in Homeric Greek to be the height of what life can offer him right now. Our state publics don’t even have Classics majors, with one exception.</p>

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<p>Very hard to support generalization.</p>

<p>In many disciplines, I might support that argument. However, 10 years down the line, nobody cares where you got your degree. It is “What have you done lately that you can do here for me?”</p>

<p>Yes, until alzheimers robs you of it, the knowledge you obtain is the primary benefit of attending college. Unfortunately, you cannot take loans against it. So it is a luxury that those who can afford spend their money on. Doesn’t sound like most of us.</p>

<p>But this thread is about value where you look at the cost vs. benefit. And for most of us who don’t have the extra $160K sitting in checking (or even home equity), that comes down to what we as parents can do to start out kids out in life now vs. what we can do for them later (grad school, etc.). </p>

<p>And if the only degree this child will recieve is a bachelors, you still have to ask whether the parent’s retirement (or need for their kid to help them out in their retirement) is worth the money. </p>

<p>And even if you decide to have the kid borrow the extra $160K (highly unlikely today), the equation becomes even worse for the private education. Tell me how many CCers out there will tell their kids to borrow $160K of the kids future earnings to pay for that experience. </p>

<p>And mind you, this argument is coming from somone who is spending a significant percentage of the family income on his daughter’s boarding school education. For her, it is meaningful as the public schools where we live now are horrible and she was not getting very good instruction when she was here.</p>

<p>Fortunately for us, we have designed our lives to have the cash flow to do this. It does not sound like the case for the OP.</p>

<p>And no, we are not able to pay $40K or $50K for private college (we don’t for boarding school). But we will pay what we can. She has her objectives and surprised us with a solid plan for making it work. She knows and appreciates what we have been doing for her, so I have no problem working out the details with her.</p>

<p>OP hasn’t come to that point yet with son and is struggling on how to explain the value.</p>