June 9, 2021 • 42 mins
For most financially responsible parents out there, it’s not a question of if they should be saving for their kid’s college, but how much. Oftentimes parents are wondering how much they need to save in order to be performing their proper parental duty. But we’re taking a more counter cultural stance and are asking the question: should you be saving for college at all? We’re all about thinking in advance and ensuring that we’re properly saving and investing our money, but for a lot of folks, the answer is that they shouldn’t be putting any money towards their child’s future college expenses. Listen as we discuss the benefits of not saving for your kids college, when you can actually start putting funds away in a college fund, and then ways you can go about it properly.
During this episode we enjoyed a Coconut Stout by Easy Chair Brewing Garage- thanks to Jess for donating this one to the podcast! And please help us to spread the word by letting friends and family know about How to Money! Hit the share button, subscribe if you’re not already a regular listener, and give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to change the conversation around personal finance and get more people doing smart things with their money!
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to How the Money. I'm Joel and I and
Matt's and today we're discussing why saving for college is overrated? Dude,
(00:26):
saving for college so overrated? You know, you actually wanted
to call this episode college is overrated. College sucks? Why
I hate education in general? College is the worst? You know,
we decided to take a less controversial title for this episode.
But we do think that saving for college that it
might be overrated, that for some folks in particular, there
should definitely be other things that take priority over saving
for college. But also too, man, just we're gonna talk
(00:48):
through some of the different benefits of not saving for
for your kids college. We think that there's a lot
that you can gain by taking some other paths, or
at least considering those other paths, right, because I think
oftentimes it can the mindset is just like, oh, it's
a slam dunk decision you gotta say for your kids college,
and that in particular, that's what we want to push
back against us. Right, We're gonna do that in today's episode.
(01:09):
But first, Matt, before we get to that, I wanted
to mention I was messaging with a buddy recently. His
name is Jess and we're actually about to have a
beer that he made on the show today. But he
he told me that his friend especially made his own
solo stove, and I'm not I'm not sure if anybody's
seen the solo stoves. Are these like really cool stainless
steel looking smokeless fire pits, and they're like three D
(01:32):
plus dollars. They're they're pretty expensive. They are premium outdoor
toys for for those who like to play the fire
in a safe way. And a lot of people got these,
you know, fire pits during the pandemic because outdoor hangs, right,
And we almost got one ourselves, but instead we opted
for the woodburning stove, not the solo stove, which I'll
describe it by the way. It's like the stainless steel
like you said, But what makes it special is the
(01:53):
fact that it's kind of got these It's insulated, so
it's double walled, that's got these special holes in it,
and that allows the heated air to re enter the
combustion zone. So essentially any unspent I guess fuel like smoke,
instead of smoking up and getting in your eyes and
causing you to choke, it ignites that smoke and so
that's why they're called smokeless fire pits. It's actually a
really cool technology. Yeah, it is cool, and and there
(02:14):
are a few manufacturers making fire pits like this now.
But but apparently you can make your own and you
can make it for like thirty bucks, and they don't
look quite as cool. I mean, the solo stoves look
really nice. They look really dope. Yeah, they're they're cool.
But you can you can make your own out of
like a giant stockpot essentially and just kind of making
your own fabrications. And so yeah, there's a YouTube video
(02:37):
that will help you figure out how you can do this.
It looks like it takes a little bit of time,
a little bit effort, but it's not impossible to do,
and it will save you a ton of money. Five
bucks man, that's not bad for having your own smokeless
fire pit. And I know, by the way, that we're
talking about this in June and it's hot and most
parts of the country, but you know, I don't know,
it might take you a few months to get it
ready and uh and and then you'll have it ready
for the fall. Exactly. I haven't ready for the fall,
(02:58):
so I will say, do you feel like it's frugal
or cheap to make your own solo stove? Oh? I
feel like totally frugal, totally frugal. Just three for a
fire pit seems expensive. And I like the idea of
just a fire pit in the ground too. And I
don't mind the smoke personally, but for somebody who wants
a smokeless firepit experience. And I was like, I love
for my eyes to water, Like I I I'm totally
(03:20):
down with people making their own. I think it's um,
I think it's a great move. Yeah, I mean, here's
my thought is that if you are interested in making
your own, then by all means, go for it. But like,
if you're just looking to not spend the money, I
think that. I mean, you definitely need to have the
right tools on hand, and in particular too, like it
involves a lot of you know, cutting and drilling metal.
I don't know if you've ever drilled metal, dude, or
tried to cut metal, but it can be pretty dicey.
(03:42):
And by dicey, I mean you can dice up your fingers.
Because uh so that's another aspect of the frugler chieve right, certainly, Yeah,
definitely where it gloves. But like if you end up
slicing your hand open and you gotta get to the
doctor uh to get stitches, well, then it's definitely a
cheap move because in the end you've wasted a lot
of time and you're bleeding everywhere. I don't want that
to happen. No, that's a good point. Yeah, But if
(04:03):
you have the tools on hand, and you've got to
know how, and it's something in particular that you enjoy doing, right,
then by all means, absolutely make your own solo stove.
In my opinion, if it's fun, well, it doesn't even
matter like if it costs more money, right like, because
if that's something that you enjoy doing, then it would
be worth your time. It would be a frugal move.
But yeah, I wouldn't say for folks to do this
only to save money, because then I don't know, I
(04:24):
think a lot of times folks can go through a
lot of headache, uh and potentially receive a product that
may not be quite as you know, quite as nice
as like a perfectly manufactured solo stove. Yeah. But for
those are that that that like going the d I
Y route, I think this is a fun option to try,
especially if you were like Man, I should have got
a nice fire pit, you know, last last fall, last winter,
I didn't do it. And now you can make your
(04:45):
own if you're up for it. But let's mention the
beer that we're having on on this show, Matt. This
is again from our friend Jess. This is UH a
coconut stout and he brews under the name Easy Chair
Brewing Garage. So yeah, looking forward to having this local
beer from from a friend on today's show. And it
makes the us too that he would have the stockpot
on hand, because when you're doing homebrew, you've you've got
lots of metal pots and pans and stuff like that
(05:06):
for for all the homebrew. So yeah, I'm looking forward
to drinking this one on the show, sharing it with
you and sharing our thoughts at the end of the episode.
And by the way, thanks Jess for donating this one
to the show. All right, let's move on to the
subject at hand, Matt. Today we're talking about why saving
for college is overrated, and yeah, it just made me think, Man,
as we're preparing for this episode, like, do you remember
(05:26):
buying the engagement ring that you got for Kate, do
you remember that process totally. Man. I remember doing that obviously.
I remember doing it because I you know, when it's
a proposed to gay and marry her, but you know,
it almost feels like that it's something that you don't
even have a choice over, right, Like it's like, oh,
if you wanna get married, like you gotta buy an
engagement right, right, And there's like a huge learning curve.
(05:47):
I feel like that comes with buying an engagement ring.
I remember learning about like the three c's, the cut, color, clarity,
and like diving forces right, like carrot, Oh yeah, carrots too,
that's right. See. So yeah, there's four seas I guess,
and like diving deep in order to like to buy
a nice ring for my wife, one one that she
would love. And some of my friends they were about
(06:07):
to get engaged at the same time, and we were
basically learning from each other, leaning on each other for advice,
you know, so and and help because we're all a
little bit lost as we were like trying to buy
this ring. And like as I was like, you know
a guy, right, and actually someone didn't know someone We
all used the same person. But like, yeah, as I
was researching the rings, there were some things that were
hard for me to come to grips with. For instance,
(06:29):
there was the cultural pressure to get an engagement ring.
The costs three times your monthly income. That was the
supposed standard, I guess, And yeah, for that scared me
because I'm like a frugal, frugal dude, and I was
borderline cheap back then, or maybe not even borderline I
was all the way back then. That was the Joel
that was asking their friends to pitch in for charcoal
when you're inviting them over to to grill out right, Yeah,
(06:50):
that was that was definitely a cheap move, not a
good friend move. I don't advise it. Those ways are
behind you, I hope, so we know they are. You
haven't charged me for charcoal in a few years. But yeah,
I mean, like that was such a such a thing
to try to try to buy this engagement ring. And
I feel like, yeah, I was able to to find
something that my wife really loved, like this vintage ring,
but I didn't actually have to end up spending an
(07:13):
arm and a leg in order to show her that
I loved her. And I ended up spending just under
a month's income instead of like the three months that
that some people were prescribing and and I think matt
saving for college seems to have taken on like a
similar culture dynamic in recent years. It puts a lot
of pressure on parents to pony up and start saving
(07:33):
money that they don't have for their kids future before
they're even funding their own. And even though it's summer
in school's out, I feel like this is just an
important topic for us to be discussing today. Yeah, it's true.
And in a sense too, you can almost be extended
as another way of saying that, like, oh, here's how
much I love you, this is how much money I've
said aside, uh, in a similar way that an engagement
ring could be misconstrued that way as well. Right. But yeah,
(07:55):
I think a lot of parents are wondering how much
they need to save in order to be per forming
their parental duty properly. But we're gonna we're gonna get
a little countercultural here and ask the questions should you
be saving for college at all? We're all about preparing
ahead of time and ensuring that we're properly saving and
investing our money. But for a lot of folks, man,
the answer is that they shouldn't be putting any money
(08:17):
towards their child's future college expenses. And so today we're
gonna discuss the benefits of not saving for your kids
college when it does make sense to start putting away
money for your kids future, and then also how to
actually go about doing it. Yeah. I love that you
said the benefits of not saving for your kids college.
You're not gonna read that headline anywhere like that. The
headlines all push you towards saving more for your kids
(08:39):
college and such rebels. But I think that's like such
an important, important thing to mention, and so yeah, let's
talk about the different reasons that we as parents are
pressured into saving for our kids college. I think knowing
why it is that we might feel hounded to set
aside massive sums of money for our kids college for
our progenese future education is really the first up to
(09:00):
overcoming that line of thinking. Yeah, that's right. And one
of the first reasons we want to touch on, man,
is just marketing and advertising. We we think that plays
a huge role. And so for instance, with the engagement
ring example you just mentioned, uh it was, it was
actually advertising from the beers back in the thirties that
said that you should spend a month's salary, but then
over the decades that expanded to three months salary. That's
(09:22):
supposed to go towards the engagement ring. And you would
think that company would be would be cool. They got
beer in their name, you know that's true. But no,
they're trying to pressure us into you know, spending more
money than we should. You know, surprised, it's not. It's
like gonna be up to six months pretty soon. Right.
But similarly, right, it's important to pay attention to the
messages that are communicated to us by colleges themselves. So
I'm thinking, like, maybe you're you're sitting there, you're watching
(09:44):
some college football or some college basketball and TV. Something
as simple as a commercial for the school that's showing
the college kids, you know, working in a lab. You know,
they've got their lab coats on, with their goggles, pipets,
that kind of thing, doing hard work. Yeah, Or maybe
they're you know, studying diligently on campus. All of these
different types of messages can have a pretty significant impact
on us as parents, whether we realize it or not.
(10:06):
It affects the way we think about things, and especially
to if your kids are sitting there. It affects the
way that they think about things because you know, they're
being told that like, oh, this is what this is
what I'm supposed to do, Like I have to go
to this this nice college, make sure I get my education,
this is an experience worth paying for exactly. Yeah, that's
what they're trying to communicate. And besides, like the marketing
and the advertising, there's peer pressure too. I think that's
(10:26):
involved in kind of our perception of how much college
should cost and how much would we should be saving
and putting away towards our kids college future. And it's
important to remember that our friends and other parents can
have a large impact on us and our attitude towards
saving for college. Also, we might think maybe that we're
immune to advertising. We might think that we're immune to
peer pressure because you know that was high school of
(10:48):
middle school, right, Like, we don't deal with your pressure anymore.
We're friends, and so our actions do impact the way
that we think about things, and we're not alone. That
goes for everybody. Yeah, yes, So basically, we we should
continue to check in on our own attitudes and our
opinions towards money and the decisions that we make with it,
like where we decide to invest and how we decide
to invest, to make sure that we're not blindly adopting
(11:08):
the values of other people that run in our social circles,
and including Matt. You know, some of those people might
be in a completely different financial situation than where and
they might be talking about how much they're setting aside
for their kids future, but we don't know if they're
neglecting their own retirement, and we don't know if they
make three times as much as we do. Like, some
of some of those things are left unsaid in the discussion, um,
(11:28):
and we can feel pressured into doing exactly what they're
doing because it's construed as loving your kids versus not
loving your kids. And I just think that's like a
not not an actual Uh, that's a false dichotomy. Yeah,
that's true. Man. It takes intentional living for us to
not go down the path of least resistance. Right. If
we're not thinking about things that we're not proactively steering,
you know what direction our lives are gonna go, and
(11:49):
we're likely going to do similar things as those around us. Right.
Another reason that I think sometimes we can feel pressured
into saving for our kids colleges. I mean, just generally speaking,
we do want the best for our kids. Right. The
research shows that higher education leads to making more money
over time. But just because that's what the research shows,
this doesn't mean that you, as a parent, that you
(12:10):
should automatically be footing the bill. And you know, again,
like we are fans of college, and so by all means,
let's encourage our kids to go to college if they
want to, but there and even if they don't want to,
you know, like it's probably something that we should encourage,
but there are lots of different ways to cover those costs.
And also, man, you know, a part of one of
the best opportunities for kids is the desire to protect
(12:31):
them from the devastating effects of student loans. Uh. You
might feel that it's better for you to take that
financial hit. You're thinking, they don't even have a job. Uh,
and so you think, Okay, I'm certainly going to be
in a better position than they will be. But that
may not be the case. That may not be true. Yeah,
I mean, like, you know, if one of my kids
needed it, I'd give him my kidney, right, like I
do something like that you can live with just one exactly,
(12:53):
and so I think like that this is like the
same mentality applies, like, well, I don't want him to
go through life with just one kidney, don't want to
go through life with like just massive amounts of student loans.
And I understand that desire, Like that makes sense, Like
I don't want my kids to go through you know,
life with a massive debt load either, But there are
other ways to come about that. We're gonna talk about
that in just a second. So actually, this maye think
(13:14):
of another potential reason that I think we feel pressured
to maybe pay for our kids college. And that's also
because if we were in the situations where our parents
did that for us, right, So you know, in your
kidney example, maybe think about that. But like if that
was done for you, it kind of makes you and
it might encourage you to kind of pay it forward
because you think, oh, well, this is how we go
about doing things. But again, do you know what your
(13:34):
parents financial situation was when they completely flitted the bill
for your Ivy League education. You might be in a
very different situation than they were in at the time,
that's right, Yeah, And I think especially as tuition prices
have risen over the last few decades, and I think
for some parents it almost feels like unethical to bring
a child into this world and then saddle them with
tens or even hundreds of thousands of dollars in student
(13:55):
loan debt that they'll likely accrue, you know, in the
in the process of getting a degree. And while I
can understand that mindset, it it really just isn't in
either or scenario. You can love your child well and
you can help them avoid an insane deat burden without
hurting your own personal finances in a big way in
the process. That's right, dude. Yeah, And all these things
that we encounter, right, whether it's like our own beliefs,
(14:17):
just the media that we consume, the messaging that is
communicated to us, or even the conversations that we have
with with other parents. Maybe you're sitting there at the
you know, the ball field or something like that, and
they're talking about how you know, they've stalked away like
grand already and their kids like three, and you're like, wait,
what that sounds like too much. I'm way behind. But
you know, peer pressure, right, Like, all these things have
(14:37):
an effect on us. All these things unite to create
the cultural pressure to pay for your kids college. Uh.
And you know this is assuming that you're in the
financial position that you're even able to pay. But like
we we often stay here on the show just because
you can do something, that doesn't mean that you should.
So after the break, we're gonna make an argument for
why you shouldn't be saving fe your kids college. We'll
(14:59):
get to that right after this all we're back, Matt,
let's keep hating on college. M not actually hating on college,
just hating on saving up way too much money and
hurting your own personal finances in the process to pay
(15:20):
for your kids college, especially when that's just the default
way of thinking, when you haven't given it the thought
that you need to. We always want to challenge the
status quo. That's right, and I think, like, yeah, the
most important reason that we would say that you should
avoid saving for college, why it's overrated, is that scholarships
in financial aid don't exist when it comes to your
retirement for your kids. There are a lot of different
(15:41):
options till lower the cost of college. There are a
million ways to skin that cat. They go to a
cheaper school, they can hunt for more scholarships, they can
work part time or even full time. Oh gasp, don't
say it ain't so, you know, while while they're in school, Uh,
they can become a resident assistant, right to help pay
and let send some of the costs for for lodging.
(16:03):
I mean, there's just so many ways to go about
lowering the cost of college. They can even join the military,
like if that's something they're interested in, Uh, in order
to pursue that higher education at minimal cost. There are
also just a lot of smart ways to score more money,
more financial aid from universities in the application process. We
talked about that in more detail with Ron Lieber from
(16:23):
The New York Times on episode three seven, and then
Matt's on top of that, even after your child graduates,
some employers will help pay down those student loans, and
public service loan forgiveness is an option for those willing
to work in public service sector for a decade. So
I feel like with all those things, when it comes
to saving for the decades that you're not gonna be
(16:44):
working for your own retirement, you can't count on Social
Security alone to get you through that. Right, there are
much fewer options than all the options that are available
to kids. Right, It's basically up to you to save
an invest in your four own k in your I
ra A. There aren't really other options, Like there is
no scholarship or financial aid for quitning work someday. But yeah,
(17:04):
with all of those resources, all those different ways that
you can lower or completely even eliminate the cost of college,
to me, that's the number one reason to make saving
for college almost like a last priority in your financial life. Yeah,
there are so many different avenues that your kids can
explore when it comes to, you know, finding creative ways
to pay for college. And especially if your finances aren't
(17:25):
up to enough, then we would recommend that you definitely
don't save for college. If say, you've got it quite
a bit of debts. Uh, you have no business saving
for your kids higher education. Uh, you gotta take care
of your own credit card debt. You need to take
care of your own car loan and even your own
student loans first, right, Like, you don't need to start
saving for your kids college when you haven't even paid
off your own college exactly. Also, if your retirement savings
(17:46):
have barely begun, or maybe they're just paltry, well, don't
save for your kids educational future. You need to make
sure that you're saving for your own future. It's wise
to operate from a position of financial strength when you're
looking to help others with their money. Joel, This is
this example is often used, but they always talk about,
you know, making sure that you've got your own oxygen
mask on your face in case of flight difficulties or
(18:06):
something like that before you help those around you. And
the same thing is true when it comes to your
own finances. Yeah, and you have the idea that you
can help your kid through school, you know, without taking
on much debt by saving for their college, But then
they're gonna have to help you out with your retirement.
That's a worst position to put your kid in. I
think better to have them have to figure out the
college thing than them have to figure out your retirement thing.
(18:29):
But but it's also important I think to point out
that the less you're able to save for your kids,
the more trade offs you're gonna have to make. But
we actually think that can be better for your kids
to have to make sacrifices and think long and hard
about those trade offs. I know, we want to give
our kids the moon, right. We want our kids to
have everything that they need. And lots of things that
they want to but that usually isn't the best move
(18:52):
for them. All you gotta do, matt Is, watch one
of my favorite movies of all time, Willy Wonka and
the Chocolate Factory, and you can see what happens to
spoil kids. You know you like the original one too, right,
you're not a huge fan of the new Johnny deppin,
I just pretend that one doesn't exist. Well, it's true though, dude,
Like if you always hand everything to your kids, kids
on a platter, Uh, they don't value the things that
they're given, right Like, And it makes sense to that
(19:14):
this applies to college because for twelve years, kids essentially
go to school for free, right. I mean, we pay taxes,
but we don't directly pay and so therefore I don't
think we value it, probably nearly as much as if
we had to pay for it out of pocket. Right.
In some instances, I bet we actually as parents signal that, oh,
school is not that important. You know, It's like, oh,
(19:34):
we can kick off, you know for a few days,
and you know, take a trip, take a family trip.
I'm not saying that the family trip isn't important. All
I'm saying is that it can be difficult for kids
to fully appreciate and value higher education. Yeah, so I think, yeah, life,
life is this continual series of trade offs, right, And
we don't want to hand everything to our kids just
because they want it. Just because they want to go
(19:56):
to the most expensive school out there doesn't mean that
that should be our goal to and that that's what's
best for the family. So yeah, why why not instead
be there with them as they encounter some of these
really important trade offs, some of these really important decisions
early on in their adult life. Your kids can graduate
college without debt, just by being intentional and with some
(20:16):
help from you. I feel like Matt. Sometimes parents believe
that student loans are the only option that then if
they don't say for their kids college, the only other
outcome is just a huge amount of student debt for
their kids. But there are so many other potential outcomes
in the middle that it doesn't have to be all
one or all the other. Yeah, man. And another reason
that that we think saving for college is overrated. Traditionally,
(20:37):
you save for college in a five twenty nine plan,
and these plans are specifically tailored for higher education costs.
But the problem is that college doesn't make sense for
all kids out there, And if you don't use the
funds in your five plan for college, then you're stuck
paying a hefty penalty in order to rescue that money
(20:58):
that's stashed there. So if your if your child chooses
a different plan of action then going to college, it's
going to be financially frustrating if you've prioritized college savings
too highly. But it's important to point out that you know,
if your kids opt to forego college, it might be
in their their own best interests. There are tons of
alternatives to four year college degrees out there. Yeah, foregoing
college might be in their best interest as a human
(21:19):
being and in their best interest financially, right, because there
are a lot of lucrative opportunities for people who don't
go to college if it's done in the right way,
I think, and I think blue collar work is one
of those ways. Matt like, the cool thing about the
skilled trades is that a lot of folks working with
their hands have little to no school debt and they
start generating income sooner. And since there's just like this
(21:41):
massive dearth of blue collar workers out there, pay rates
have gone up in a big way too, and the
blue collar route makes more and more sense for lots
of kids that are inclined in that direction. And so, yeah,
if people want to learn more about that, we we
talked with Ken Rusk about blue collar work and how
you can make more money doing it in episode two
seventies seven. But I think sometimes, uh, you know, in
(22:01):
this country, we've been so brainwashed to believe that college
is the only route for so many kids, that a
lot of kids go there they accrued, they accrued debt
that they don't need to, They waste years that they
don't need to getting an education they're not interested in,
when they would have been far better served going you know,
the blue collar direction from the get go. Yeah, not
only are there great blue collar jobs out there, but
there are plenty of non manual labor options for for folks,
(22:24):
like just different technology jobs right that that don't require
a four year degree. Like I'm thinking, maybe there's a
kid who's like just really into video games. Well, instead
of starting to to study for the s A T
during the summers in high school, maybe try taking a
a C plus plus course or another coding course. But
consider some of these alternatives to just solely focusing on
college because I think not only can you find uh
(22:47):
lucrative page well like you mentioned too, but like you
can just find a lot of fulfillment in these professions.
And it only makes even more sense if you already
have an interest in those specific topics. Yeah, entrepreneurship is
another route. You can be a blue collar entrepreneur. You
can mix mix both, right, You can kind of start
your own business on the side, or you can start
another business. Do you believe meets a problem that needs solving.
(23:08):
So like, with all the information I think to Matt
that's available to our kids these days, they don't necessarily
have to go to a liberal arts college in order
to begin to experience all that's out there. It's not
that the internet replaces the need for higher education, but
I feel like it does allow the opportunity for kids
to discover some of the things that they might be
passionate about a little bit cheaper in an earlier age too,
(23:29):
without having to pay a ton for for that college degree.
I feel like the first couple of years of college
for at least our generation, right, that's when we kind
of started to figure out what courses were being offered
what other people were pursuing, and we kind of started
to get that idea for ourselves. But kids these days,
there's so much at their fingertips that they can kind
of like scratch the itch on some of their curiosities
(23:50):
even earlier in life than ever before, and that can actually,
I think, lead them down the direction of entrepreneurship even
sooner before they even have to set foot on a
college campus. That's right, man. And so another reason too
that we we think that saving for college is overrated.
Who knows how far a college degree will get a
student after they graduate, right, Like, we don't know the
(24:11):
future per se. And to be honest, like that could
be an excuse to avoid doing lots of different things
because you can just say, well, like, who knows what
the stock market's gonna do. I don't know, I don't
I shouldn't invest. Who knows what the future holds. I'm
just gonna see here, I'm a bomb exactly. But it's
true that college might not be as an attractive of
a choice in ten the fifteen years. Right now, the
math still works for lots of kids to get a
(24:31):
college degree, but as the cost of college continues to rise, Uh,
we we feel that it's not as much of a
slam dunk because it used to be. It used to
be to work, getting a degree that meant pretty much
by default, you're gonna get a you know, pretty nice,
high paying job. But these days, getting a degree doesn't
automatically mean that you're gonna get a higher income like
it used to. Yeah, college degree used to equal ticket
to the middle class, right at least, and now it
(24:54):
doesn't in the same way that it used to. Although
you know, the stats still reveal, like you said, Matt,
that you do make more money when you have a
college degree, there are still a lot of other pockets
that make sense for kids to explore because college isn't
quite as worthwhile as it used to be. Another thing too,
to remember when it comes to saving for college, is
that we can get too caught up in saving for
the future that we neglect to invest in our kids
(25:17):
in important ways. Now, like saving for college I think
can become this like myopic goal, and it's easy to
forget the real goal, which is to raise kids that
are going to thrive in the real world. Right, So
maybe instead of like fully funding that five account or
even putting any money towards it. Consider spending more money
during the years that your kids live under your roof
to help grow their skills and their awareness. It's not
(25:39):
that saving for your kids college is the worst thing
in the world. I think it's just that people oftentimes
focus so hard on that they neglect some of the
experiences and places that they could be spending money now
on their kids that are going to actually have a
bigger impact on their ability to be productive citizens of
the world. That's right, Yeah, I mean you've got to
be balanced, right, And in a similar way that we
(25:59):
value craft beer, right, I mean, that's that's part of
why we have a craft beer on every episode, because
we want to demonstrate that we're trying to seek after
balance when it comes to saving for retirement, because if
you're only focused on retirement, right, like that magical fifty
nine and a half, you might get to that point
in your life and realize that like, oh, I guess
I should find some hobbies, Like, like, I don't really
have a life, I don't have many relationships in my life,
(26:20):
And so that's what we want to try to avoid
when it comes to our kids as well. And so
I'm just thinking of like family trips like learning an instrument,
you know, playing sports like these are all examples of
spending money that can help your kids become more well rounded.
And if you neglect those things in favor of building
a nine nest egg like that might be more of
a short sighted move. So chances are, if you're listening
(26:41):
to this episode, like you're into personal finance, right and
as you know, self professing personal finance nerds ourselves like
I can admit that it can be tempting to focus
on the money, the dollar amount in that nest egg,
rather than the intangible benefits that come with intentional and
quality time that we can spend with our kids. Money
isn't the fix for every single problem out there, and
so look to other ways to expand your kids horizons
(27:05):
beyond just assuming that a college degree is going to
be key for them to grow up into a happy,
functioning adults. So, all that being said, saving for college,
though it does make sense for some folks, it might
make sense for a lot of folks, and so we're
gonna talk about when that is, when it actually does
make sense free to save for your kids college, and
then how to go about it. Right after this, all right,
(27:35):
we're back and Matt. Of course, we do believe that
saving for college is overrated. We wouldn't put it on
the tireless episode if we didn't believe that. But we've
also relegated saving for your kids college to money get
number seven. Like literally, we did an episode at the
beginning of this year, episode three or two. We talked
about the seven money gears and you know when to
do what with your money and money gear number seven
(27:55):
is the last year and only if you're there, should
you even be considering, uh, say, being any money for
your kids college. We would say, that's how that's how
overrated it is. It should be the last thing that
you consider. Exactly. Yeah, it's it's in that like I
want to travel more and I want to say for
my kids college, Like those two things go together. I
think you know that those two things are in the
same money gear. But if you are crushing it, if
your finances are checking along, you've done a great job
(28:17):
investing for your own retirement, you don't have any of
that nasty credit card or student loan debt hanging around.
Then let's talk about how to go about saving for
your kids college in the most effective ways. Because Yeah,
there are some people, Matt who are doing a great
job with their personal finances. They want to start investing
for their kids college future. I understand that five plans,
we would say, are the best vehicle for doing so.
(28:38):
They aren't the only way. We're gonna talk about other
methods in a second too, but we should at least
start with five to nine plans first because they were
created for this very purpose. So yeah, kind of kick
us off. We'll talk about the pros and cons of
opening a five plan for your kids. Yeah, so plans,
I mean, the biggest reason that folks are opening these
is because of the tax break that you receive. Right,
(28:59):
All five twenty nine plans offer tax breaks on the
earnings that happened to be invested inside of that plan. So,
for example, if you invest ten thousand dollars and then
it grows to forty dollars over the years, you will
never pay tax on your earnings if you use those
funds for qualified expenses. And uh. In some states that
have state income taxes actually offered the additional incentive of
(29:21):
a tax break on the contributions that you make, and
so that's the case in the state of Georgia. As
well as more than thirty other states. So there are
a lot of states that have five twenty nine plans.
And so while you don't receive a federal deduction on
the amount of money that you invest into five uh yeah,
for a lot of states, you do get a state
benefit if you reside within the states. Yeah, And so
I think that that's the main reason. I think if
(29:43):
you're if you're doing well financially, to open a five
twenty nine account. It's like my kids in all likelihood
going to go to college. Most of the people in
our family did, and so we're gonna start saving now,
and we're gonna get the tax break. And I think
that's a reasonable reason to open a five twenty nine
plan and start that process. You can even use a
site like backer dot com to solicit contributions from your
(30:04):
friends and family, And so I think, Matt, this is
like perfect for a lot of people who maybe you're
tired of getting a bunch of gifts they create clutter
around like birthdays and holidays. Um, you're talking to the
right guy, the guy who hates clutter in pieces of
junk and plastic in his home. Oh my gosh. Yeah.
So so yeah, we're we're right now in the process
of downsizing our kids toy collection because it's just gotten
(30:27):
out of hand and and like that hang quickly. And
I know, like my parents are gonna want to get
them some sort of toy for the birthday this summer,
but I'm gonna be like one toy limit. And and
maybe if you want to give them more, maybe contribute
to their five account. Right, that's a perfect way like
it to destructure this is to say, ask your loved
ones maybe too to contribute to the five twenty nine
plan that you've started in lieu of additional presence. But
(30:49):
you're probably gonna need to let them give them one
or they're not gonna be not gonna be happy. But yeah,
five nine plans I think make a whole lot more
sense when you have other people, other loved ones who
are able to contribute. We'll put a link to that
in the show notes. But that's an easy way to
allow them to to contribute on your kid's behalf. Yeah,
So that's the biggest advantage of a five twenty nine
(31:10):
plan is that those earnings grow tax free, but you
do pay tax, you know, on the on the front end.
So essentially it's kind of like a roth ira a
where uh you get that tax break on the back end,
you don't ever have to worry about, you know, paying
tax on that money as long as you use it
for the right thing. That's the strongest argument four five
nine plan. But the biggest reason to avoid these plans
is something that we've already touched on. But if you
(31:30):
have kids who don't end up going to college and
you want to use those funds for other reasons, then
you're gonna have to pay for it. And so non
qualified distributions get hit with income tax plus an extra
ten percent penalty on those earnings. And so that means
that median households right now in the U S could
be paying between twenty two uh tot Like that is
a big bite out of that five twenty nine nest egg.
(31:51):
If your kids happen to not go to college. There
is some good news though, right if if your child
gets a full scholarship to college, then you you actually
won't have to pay the penalty at least that you
can avoid that ten percent, but you will still have
to pay income tax on that money, and that's also
up to that scholarship dollar amount. But you know, in general,
we we we do feel that the tax benefits of
five twenty nine plans are often oversold. For instance, let's
(32:14):
say you instead invested that money in a brokerage account,
you would be subject to a fifteen percent capital you know,
gains rate for most folks. Uh. And while you know
that's more than zero, it's also not the end of
the world. I guess what I'm saying is that if
you're not sure what it is that your kids are
gonna do, like maybe you don't have a history of
your family members going to college, maybe you have a
(32:35):
strong history of skilled labors or or artists, you know,
different folks who have maybe started their own businesses, then
maybe investing that money in a brokerage account might be
a smarter move for you. You You know, we we do
feel that avoiding taxes is smart. Right. Anytime you can
do that and you know that you're gonna come out ahead,
we would recommend that. But this is an instance where
you know you don't want to have the tail wag
(32:57):
the dog. In this case, you don't want to walk
a way those funds within the five twenty nine plan
uh and then be forced to pay a lot of
money in taxes or penalties because your kids don't actually
end up going to college. Yeah, that's like the worst
possible scenario that you don't want to find yourself in
or not, I mean not the worst like that could
be like trapped in a cave alone or something like
that. That That would be much much worse. That specifically would
(33:20):
be probably the worst thing for you. Probably actually come
up with a with a laundry list of things over
your words. But yeah, that is like when it comes
to a tax and money perspective, that's that's a bad thing, right.
You don't want to contribute a bunch of money to
the five nine account that you're not going to be
able to use, and that is I think Matt, you're
right that it's one of the biggest downsides. Let's talk
about two other ways that you can save for your
(33:41):
kids college. It doesn't have to be a five twenty
nine plan. There are other methods that are more flexible.
We're gonna talk about now. Are not accounts specifically created
to help you, say for your kids college, and that's
the five account, But there are other methods that you
can use that are going to crush you if those
funds don't end up going to to help pay for
your kids college. The roth Ira is such a great vehicle.
(34:03):
We're big fans of it saving for your own retirement,
and it offers more flexibility than the five plan two.
And that's a check mark in favor of going in
that direction over the plan direction, and a checkmark over
rowerdge accounts. Yeah, I mean I just mentioned that, just
like taxable brokerage accounts. But like if you have access
to a rath I mean, and you're not already maxing
it out, like yeah, yeah, then that should come first,
(34:23):
definitely before a brokerage account. Yeah, and before and if
you're under the age of fifty nine and a half
when you're gonna need some of that money to help
pay for your kids schooling, you can pull out contributions
without paying any tax or penalty. You can also pull
any earnings too. You will have to pay income tax
on that money, but if it's used for college, you
get to avoid the temper cent roth Ira early withdraw penalty.
(34:46):
It's still important to tread carefully when you're using the
roth ira uh money in your roth Ira for this purpose,
because you're likely going to need a big chunk of
that money to fund your own retirement. So it's not
one of those things where it's like you're you're hoping
to use that for your kids college. You're still hoping
that they're able to go to school cheaply enough, right,
and that you can find enough financial aid to lower
(35:07):
the burden and that you can hold onto your ira
A money for your own retirement. Um, but it is,
I would say for almost everyone, it's a better account
to be filling up before you even open the five Yeah.
Uh and then do Let's let's mention one avenue that
you and I are partial to. Real estate investing can
can be another route to help pay for college. You know,
you don't have to go the conventional route necessarily like
(35:28):
roth iras E accounts. They're great. But you know what,
if you love real estate investing like we do, dude,
I love the idea of building up a steady stream
of income over time via rental properties. That money can
help you increase your current income and it can be
used as a way to fund bigger lump some costs
like college down the road. You can either use the
recurring cash flow to help pay for your kids college expenses,
(35:51):
or you can even sell a property to pay a
tuition bill in full. Real estate investing isn't necessarily going
to be for everyone out there, but for those of
you who do have an interest in real estate, this
could be another way of thinking about paying for college
down the road. Look at a specific property, maybe assigned
that property to do a kid boom, you got college
taken care of us, right, Yeah. Especially, let's say your
kids three years old, they're going to college in fifteen years,
(36:14):
and if you if you really want to pay for
it in one lump sum, what you can say is like,
all right, I'm gonna get a fifteen year mortgage and
I'm gonna, you know, make a little bit of money
every month on the spread. And then in fifteen years,
I'm gonna sell this house and I'm going to use
that to fund their college. Like that's the one way
of thinking about it, right, There's a million ways to
skin this cat, Like assuming that they go to the
most expensive college of all times, right, because the way
(36:36):
real estate properties are going these days, that should be
more than enough to pay for college. But then again,
who knows what college is going to cost, uh eighteen
years and so so, man, I think you know infammation,
save me for college can be a nice thing to
do for your kids, But you don't have to save
for your child's college education to be a good parents.
And I think that's what a lot of people feel
(36:57):
innately right now, is like if I don't, I'm not
a great parent, or I'm not doing what other people
are doing for for their kids, and so I'm not
sacrificing enough, not feeling the pain. I'm like a B
minus or a C plus on the parenting scale. And
that's just not true. And of course it's hard to
reach all of the financial goals that we want to achieve.
It'd be nice, right if we could max out our
(37:17):
four O one k I RA playing nhs A like
that would be that would be like a perfect ideal world, right,
if you can do all the above, But it's important
to not let your financial priorities get out of order.
If you can take that all the above approach, more
power do you like if you're if you've got that
kind of income and that kind of frugality level, like congratulations,
But you are the anomaly in this conversation. And there
(37:38):
are a lot of reasons that saving for college isn't
all it's cracked up to be, even though it's a
worthwhile goal to have in the future, as your personal
financial situation continues to get stronger as you build wealth,
maybe down the road you can start to put away
little dribs and drabs, you know, open up a five
account maybe. But it's a really low priority in in
the scheme of things, that's right, man. Yes, hopefully we
(38:00):
have adequately convinced you that saving for college is overrated.
That's something that, uh, you can do, but it's not
something that you have to do, all right, Joel, Let's
get back to the beer that you and I enjoyed
on this episode. This beer is technically a homebrew from
our friend Jess and and he brews under the Moniker
easy Chair brewing garage. Uh, and this is what he
(38:21):
calls his bass stout recipe that went through a second
fermentation with coconut shavings. Joel, what were your thoughts on
this beer? So I think he was actually gonna name
this beer Matt is my favorite how to Money house,
but he didn't want to make me feel bad, and
so I appreciate that. Jess, but that would have been
a good name for this one. But I thought this
was really good. Dude. One should have just been called
Matt and then we're actually gonna have another one by him,
(38:41):
and he could have just called that one. Joel, that's
that's the peach Sheltzer. I feel like you kind of
got this peach summertime vibes going on, Joel. I appreciate that.
I don't know if that's a compliment or not. Yeah, uh,
it's probably both at once, and I'll like it. I'm
fine with that. But man, I really like this one
because it had an adjunct, which is just anything else
you put into a stout, like you know, like coconut
(39:03):
and coffee. Sometimes it's a popular adjunct when it comes
to stouts, but sometimes breweries overdo it, and I feel
like the pastry stouts are a prime example of that.
Sometimes it's like I'm actually eating a doughnut and it
it feels like too much. It's overwhelming, and I'm like, man,
I actually want to taste the beer. I actually want
to taste the stout, not just the sprinkles it Like,
I didn't want to actually have to chew my beer
(39:25):
this time. But but yeah, you're saying that that's not
the case. This time, but sometimes we do have stouts
that are like that where it's just seriously too thick
this is on beer. But yeah, I agree, man, it's
got like the perfect amount of coconut going on. He
was light on the touch with the coconut, but yeah,
it's like it's there, it's present, it's adding something lovely.
But the stout the base itself is just really delicious too.
So man, I think Jess is getting his game together
(39:47):
seriously on the homebrewnk. A lot of times when it
comes to homebrews, like there's a different scale in my
mind because like it's always like no for for homebrew,
this is pretty good, but this, like this is like
for a beer, this is good, Like I would pay
for this. Uh. This actually reminds me Creature Comforts that
they released a bunch of kind of special stouts there
in there at the brewery that they don't ever release
(40:08):
or bottle or can or anything like that, And this
reminds me of one that I had actually there in
the brewery. But like it almost has a milky quality
to it. It's just really smooth, almost almost creamy, like
you said, the coconuts just right. I feel like it
tastes kind of like their their cocoa bunny porter. Oh
maybe maybe that's it, like I was, I think I
was picturing like I can't remember, like the tree that
owns itself or something like that. They've got all these
(40:28):
different stouts there, but it does. It kind of has
that cocoa bunny action going on. This is a really
great stout and it deserves a name. Uh we should. Yeah,
we gotta convince Jess to name his beers. This one
he just labeled number one since since he gave his
two beers. But uh, yeah, this one's really good. I'm
glad that he donated this one to the show. And
again even though he donated it, like I would by
(40:48):
this beer in the store. Totally Yeah, I feel like
we already named it for him. Matt is my favorite
and how the Money House, and I'm gonna agree with him,
You're you're my favorite. How the Money House? Too sweet?
All right, Well, that's gonna do it for the love
fest and in this episode. But for folks that want
show notes and some of the resources that we we
mentioned on this episode, just go to our website at
how to money dot com. They'll be up there for you.
(41:11):
That is true. And something else that is true is
that when you leave us a review, it helps the
show positive and Angel gets its wins every time the
bell already, it really does help others to find the show.
And actually I saw a recent review that was left
for our show and they said that they found the
show because it was recommended within their podcasting app where
they listen to podcasts, and so these positive reviews they
(41:32):
help out in the algorithm and when it comes to
other people discovering and finding the show. So sometimes you
might think that's something that they just always say, but no,
for real, we really do mean it, and it's why
we we do consistently ask for those reviews. So if
you haven't left us a review wherever it is that
you listen to your podcasts, we would love it if
you did that, and thanks in advance, no doubt. All Right,
that's gonna do it for this episode. Until next time,
(41:53):
best Friends Out and best Friends Out
Welcome to How the Money. I'm Joel and I and
Matt's and today we're discussing why saving for college is overrated? Dude,
(00:26):
saving for college so overrated? You know, you actually wanted
to call this episode college is overrated. College sucks? Why
I hate education in general? College is the worst? You know,
we decided to take a less controversial title for this episode.
But we do think that saving for college that it
might be overrated, that for some folks in particular, there
should definitely be other things that take priority over saving
for college. But also too, man, just we're gonna talk
(00:48):
through some of the different benefits of not saving for
for your kids college. We think that there's a lot
that you can gain by taking some other paths, or
at least considering those other paths, right, because I think
oftentimes it can the mindset is just like, oh, it's
a slam dunk decision you gotta say for your kids college,
and that in particular, that's what we want to push
back against us. Right, We're gonna do that in today's episode.
(01:09):
But first, Matt, before we get to that, I wanted
to mention I was messaging with a buddy recently. His
name is Jess and we're actually about to have a
beer that he made on the show today. But he
he told me that his friend especially made his own
solo stove, and I'm not I'm not sure if anybody's
seen the solo stoves. Are these like really cool stainless
steel looking smokeless fire pits, and they're like three D
(01:32):
plus dollars. They're they're pretty expensive. They are premium outdoor
toys for for those who like to play the fire
in a safe way. And a lot of people got these,
you know, fire pits during the pandemic because outdoor hangs, right,
And we almost got one ourselves, but instead we opted
for the woodburning stove, not the solo stove, which I'll
describe it by the way. It's like the stainless steel
like you said, But what makes it special is the
(01:53):
fact that it's kind of got these It's insulated, so
it's double walled, that's got these special holes in it,
and that allows the heated air to re enter the
combustion zone. So essentially any unspent I guess fuel like smoke,
instead of smoking up and getting in your eyes and
causing you to choke, it ignites that smoke and so
that's why they're called smokeless fire pits. It's actually a
really cool technology. Yeah, it is cool, and and there
(02:14):
are a few manufacturers making fire pits like this now.
But but apparently you can make your own and you
can make it for like thirty bucks, and they don't
look quite as cool. I mean, the solo stoves look
really nice. They look really dope. Yeah, they're they're cool.
But you can you can make your own out of
like a giant stockpot essentially and just kind of making
your own fabrications. And so yeah, there's a YouTube video
(02:37):
that will help you figure out how you can do this.
It looks like it takes a little bit of time,
a little bit effort, but it's not impossible to do,
and it will save you a ton of money. Five
bucks man, that's not bad for having your own smokeless
fire pit. And I know, by the way, that we're
talking about this in June and it's hot and most
parts of the country, but you know, I don't know,
it might take you a few months to get it
ready and uh and and then you'll have it ready
for the fall. Exactly. I haven't ready for the fall,
(02:58):
so I will say, do you feel like it's frugal
or cheap to make your own solo stove? Oh? I
feel like totally frugal, totally frugal. Just three for a
fire pit seems expensive. And I like the idea of
just a fire pit in the ground too. And I
don't mind the smoke personally, but for somebody who wants
a smokeless firepit experience. And I was like, I love
for my eyes to water, Like I I I'm totally
(03:20):
down with people making their own. I think it's um,
I think it's a great move. Yeah, I mean, here's
my thought is that if you are interested in making
your own, then by all means, go for it. But like,
if you're just looking to not spend the money, I
think that. I mean, you definitely need to have the
right tools on hand, and in particular too, like it
involves a lot of you know, cutting and drilling metal.
I don't know if you've ever drilled metal, dude, or
tried to cut metal, but it can be pretty dicey.
(03:42):
And by dicey, I mean you can dice up your fingers.
Because uh so that's another aspect of the frugler chieve right, certainly, Yeah,
definitely where it gloves. But like if you end up
slicing your hand open and you gotta get to the
doctor uh to get stitches, well, then it's definitely a
cheap move because in the end you've wasted a lot
of time and you're bleeding everywhere. I don't want that
to happen. No, that's a good point. Yeah, But if
(04:03):
you have the tools on hand, and you've got to
know how, and it's something in particular that you enjoy doing, right,
then by all means, absolutely make your own solo stove.
In my opinion, if it's fun, well, it doesn't even
matter like if it costs more money, right like, because
if that's something that you enjoy doing, then it would
be worth your time. It would be a frugal move.
But yeah, I wouldn't say for folks to do this
only to save money, because then I don't know, I
(04:24):
think a lot of times folks can go through a
lot of headache, uh and potentially receive a product that
may not be quite as you know, quite as nice
as like a perfectly manufactured solo stove. Yeah. But for
those are that that that like going the d I
Y route, I think this is a fun option to try,
especially if you were like Man, I should have got
a nice fire pit, you know, last last fall, last winter,
I didn't do it. And now you can make your
(04:45):
own if you're up for it. But let's mention the
beer that we're having on on this show, Matt. This
is again from our friend Jess. This is UH a
coconut stout and he brews under the name Easy Chair
Brewing Garage. So yeah, looking forward to having this local
beer from from a friend on today's show. And it
makes the us too that he would have the stockpot
on hand, because when you're doing homebrew, you've you've got
lots of metal pots and pans and stuff like that
(05:06):
for for all the homebrew. So yeah, I'm looking forward
to drinking this one on the show, sharing it with
you and sharing our thoughts at the end of the episode.
And by the way, thanks Jess for donating this one
to the show. All right, let's move on to the
subject at hand, Matt. Today we're talking about why saving
for college is overrated, and yeah, it just made me think, Man,
as we're preparing for this episode, like, do you remember
(05:26):
buying the engagement ring that you got for Kate, do
you remember that process totally. Man. I remember doing that obviously.
I remember doing it because I you know, when it's
a proposed to gay and marry her, but you know,
it almost feels like that it's something that you don't
even have a choice over, right, Like it's like, oh,
if you wanna get married, like you gotta buy an
engagement right, right, And there's like a huge learning curve.
(05:47):
I feel like that comes with buying an engagement ring.
I remember learning about like the three c's, the cut, color, clarity,
and like diving forces right, like carrot, Oh yeah, carrots too,
that's right. See. So yeah, there's four seas I guess,
and like diving deep in order to like to buy
a nice ring for my wife, one one that she
would love. And some of my friends they were about
(06:07):
to get engaged at the same time, and we were
basically learning from each other, leaning on each other for advice,
you know, so and and help because we're all a
little bit lost as we were like trying to buy
this ring. And like as I was like, you know
a guy, right, and actually someone didn't know someone We
all used the same person. But like, yeah, as I
was researching the rings, there were some things that were
hard for me to come to grips with. For instance,
(06:29):
there was the cultural pressure to get an engagement ring.
The costs three times your monthly income. That was the
supposed standard, I guess, And yeah, for that scared me
because I'm like a frugal, frugal dude, and I was
borderline cheap back then, or maybe not even borderline I
was all the way back then. That was the Joel
that was asking their friends to pitch in for charcoal
when you're inviting them over to to grill out right, Yeah,
(06:50):
that was that was definitely a cheap move, not a
good friend move. I don't advise it. Those ways are
behind you, I hope, so we know they are. You
haven't charged me for charcoal in a few years. But yeah,
I mean, like that was such a such a thing
to try to try to buy this engagement ring. And
I feel like, yeah, I was able to to find
something that my wife really loved, like this vintage ring,
but I didn't actually have to end up spending an
(07:13):
arm and a leg in order to show her that
I loved her. And I ended up spending just under
a month's income instead of like the three months that
that some people were prescribing and and I think matt
saving for college seems to have taken on like a
similar culture dynamic in recent years. It puts a lot
of pressure on parents to pony up and start saving
(07:33):
money that they don't have for their kids future before
they're even funding their own. And even though it's summer
in school's out, I feel like this is just an
important topic for us to be discussing today. Yeah, it's true.
And in a sense too, you can almost be extended
as another way of saying that, like, oh, here's how
much I love you, this is how much money I've
said aside, uh, in a similar way that an engagement
ring could be misconstrued that way as well. Right. But yeah,
(07:55):
I think a lot of parents are wondering how much
they need to save in order to be per forming
their parental duty properly. But we're gonna we're gonna get
a little countercultural here and ask the questions should you
be saving for college at all? We're all about preparing
ahead of time and ensuring that we're properly saving and
investing our money. But for a lot of folks, man,
the answer is that they shouldn't be putting any money
(08:17):
towards their child's future college expenses. And so today we're
gonna discuss the benefits of not saving for your kids
college when it does make sense to start putting away
money for your kids future, and then also how to
actually go about doing it. Yeah. I love that you
said the benefits of not saving for your kids college.
You're not gonna read that headline anywhere like that. The
headlines all push you towards saving more for your kids
(08:39):
college and such rebels. But I think that's like such
an important, important thing to mention, and so yeah, let's
talk about the different reasons that we as parents are
pressured into saving for our kids college. I think knowing
why it is that we might feel hounded to set
aside massive sums of money for our kids college for
our progenese future education is really the first up to
(09:00):
overcoming that line of thinking. Yeah, that's right. And one
of the first reasons we want to touch on, man,
is just marketing and advertising. We we think that plays
a huge role. And so for instance, with the engagement
ring example you just mentioned, uh it was, it was
actually advertising from the beers back in the thirties that
said that you should spend a month's salary, but then
over the decades that expanded to three months salary. That's
(09:22):
supposed to go towards the engagement ring. And you would
think that company would be would be cool. They got
beer in their name, you know that's true. But no,
they're trying to pressure us into you know, spending more
money than we should. You know, surprised, it's not. It's
like gonna be up to six months pretty soon. Right.
But similarly, right, it's important to pay attention to the
messages that are communicated to us by colleges themselves. So
I'm thinking, like, maybe you're you're sitting there, you're watching
(09:44):
some college football or some college basketball and TV. Something
as simple as a commercial for the school that's showing
the college kids, you know, working in a lab. You know,
they've got their lab coats on, with their goggles, pipets,
that kind of thing, doing hard work. Yeah, Or maybe
they're you know, studying diligently on campus. All of these
different types of messages can have a pretty significant impact
on us as parents, whether we realize it or not.
(10:06):
It affects the way we think about things, and especially
to if your kids are sitting there. It affects the
way that they think about things because you know, they're
being told that like, oh, this is what this is
what I'm supposed to do, Like I have to go
to this this nice college, make sure I get my education,
this is an experience worth paying for exactly. Yeah, that's
what they're trying to communicate. And besides, like the marketing
and the advertising, there's peer pressure too. I think that's
(10:26):
involved in kind of our perception of how much college
should cost and how much would we should be saving
and putting away towards our kids college future. And it's
important to remember that our friends and other parents can
have a large impact on us and our attitude towards
saving for college. Also, we might think maybe that we're
immune to advertising. We might think that we're immune to
peer pressure because you know that was high school of
(10:48):
middle school, right, Like, we don't deal with your pressure anymore.
We're friends, and so our actions do impact the way
that we think about things, and we're not alone. That
goes for everybody. Yeah, yes, So basically, we we should
continue to check in on our own attitudes and our
opinions towards money and the decisions that we make with it,
like where we decide to invest and how we decide
to invest, to make sure that we're not blindly adopting
(11:08):
the values of other people that run in our social circles,
and including Matt. You know, some of those people might
be in a completely different financial situation than where and
they might be talking about how much they're setting aside
for their kids future, but we don't know if they're
neglecting their own retirement, and we don't know if they
make three times as much as we do. Like, some
of some of those things are left unsaid in the discussion, um,
(11:28):
and we can feel pressured into doing exactly what they're
doing because it's construed as loving your kids versus not
loving your kids. And I just think that's like a
not not an actual Uh, that's a false dichotomy. Yeah,
that's true. Man. It takes intentional living for us to
not go down the path of least resistance. Right. If
we're not thinking about things that we're not proactively steering,
you know what direction our lives are gonna go, and
(11:49):
we're likely going to do similar things as those around us. Right.
Another reason that I think sometimes we can feel pressured
into saving for our kids colleges. I mean, just generally speaking,
we do want the best for our kids. Right. The
research shows that higher education leads to making more money
over time. But just because that's what the research shows,
this doesn't mean that you, as a parent, that you
(12:10):
should automatically be footing the bill. And you know, again,
like we are fans of college, and so by all means,
let's encourage our kids to go to college if they
want to, but there and even if they don't want to,
you know, like it's probably something that we should encourage,
but there are lots of different ways to cover those costs.
And also, man, you know, a part of one of
the best opportunities for kids is the desire to protect
(12:31):
them from the devastating effects of student loans. Uh. You
might feel that it's better for you to take that
financial hit. You're thinking, they don't even have a job. Uh,
and so you think, Okay, I'm certainly going to be
in a better position than they will be. But that
may not be the case. That may not be true. Yeah,
I mean, like, you know, if one of my kids
needed it, I'd give him my kidney, right, like I
do something like that you can live with just one exactly,
(12:53):
and so I think like that this is like the
same mentality applies, like, well, I don't want him to
go through life with just one kidney, don't want to
go through life with like just massive amounts of student loans.
And I understand that desire, Like that makes sense, Like
I don't want my kids to go through you know,
life with a massive debt load either, But there are
other ways to come about that. We're gonna talk about
that in just a second. So actually, this maye think
(13:14):
of another potential reason that I think we feel pressured
to maybe pay for our kids college. And that's also
because if we were in the situations where our parents
did that for us, right, So you know, in your
kidney example, maybe think about that. But like if that
was done for you, it kind of makes you and
it might encourage you to kind of pay it forward
because you think, oh, well, this is how we go
about doing things. But again, do you know what your
(13:34):
parents financial situation was when they completely flitted the bill
for your Ivy League education. You might be in a
very different situation than they were in at the time,
that's right, Yeah, And I think especially as tuition prices
have risen over the last few decades, and I think
for some parents it almost feels like unethical to bring
a child into this world and then saddle them with
tens or even hundreds of thousands of dollars in student
(13:55):
loan debt that they'll likely accrue, you know, in the
in the process of getting a degree. And while I
can understand that mindset, it it really just isn't in
either or scenario. You can love your child well and
you can help them avoid an insane deat burden without
hurting your own personal finances in a big way in
the process. That's right, dude. Yeah, And all these things
that we encounter, right, whether it's like our own beliefs,
(14:17):
just the media that we consume, the messaging that is
communicated to us, or even the conversations that we have
with with other parents. Maybe you're sitting there at the
you know, the ball field or something like that, and
they're talking about how you know, they've stalked away like
grand already and their kids like three, and you're like, wait,
what that sounds like too much. I'm way behind. But
you know, peer pressure, right, Like, all these things have
(14:37):
an effect on us. All these things unite to create
the cultural pressure to pay for your kids college. Uh.
And you know this is assuming that you're in the
financial position that you're even able to pay. But like
we we often stay here on the show just because
you can do something, that doesn't mean that you should.
So after the break, we're gonna make an argument for
why you shouldn't be saving fe your kids college. We'll
(14:59):
get to that right after this all we're back, Matt,
let's keep hating on college. M not actually hating on college,
just hating on saving up way too much money and
hurting your own personal finances in the process to pay
(15:20):
for your kids college, especially when that's just the default
way of thinking, when you haven't given it the thought
that you need to. We always want to challenge the
status quo. That's right, and I think, like, yeah, the
most important reason that we would say that you should
avoid saving for college, why it's overrated, is that scholarships
in financial aid don't exist when it comes to your
retirement for your kids. There are a lot of different
(15:41):
options till lower the cost of college. There are a
million ways to skin that cat. They go to a
cheaper school, they can hunt for more scholarships, they can
work part time or even full time. Oh gasp, don't
say it ain't so, you know, while while they're in school, Uh,
they can become a resident assistant, right to help pay
and let send some of the costs for for lodging.
(16:03):
I mean, there's just so many ways to go about
lowering the cost of college. They can even join the military,
like if that's something they're interested in, Uh, in order
to pursue that higher education at minimal cost. There are
also just a lot of smart ways to score more money,
more financial aid from universities in the application process. We
talked about that in more detail with Ron Lieber from
(16:23):
The New York Times on episode three seven, and then
Matt's on top of that, even after your child graduates,
some employers will help pay down those student loans, and
public service loan forgiveness is an option for those willing
to work in public service sector for a decade. So
I feel like with all those things, when it comes
to saving for the decades that you're not gonna be
(16:44):
working for your own retirement, you can't count on Social
Security alone to get you through that. Right, there are
much fewer options than all the options that are available
to kids. Right, It's basically up to you to save
an invest in your four own k in your I
ra A. There aren't really other options, Like there is
no scholarship or financial aid for quitning work someday. But yeah,
(17:04):
with all of those resources, all those different ways that
you can lower or completely even eliminate the cost of college,
to me, that's the number one reason to make saving
for college almost like a last priority in your financial life. Yeah,
there are so many different avenues that your kids can
explore when it comes to, you know, finding creative ways
to pay for college. And especially if your finances aren't
(17:25):
up to enough, then we would recommend that you definitely
don't save for college. If say, you've got it quite
a bit of debts. Uh, you have no business saving
for your kids higher education. Uh, you gotta take care
of your own credit card debt. You need to take
care of your own car loan and even your own
student loans first, right, Like, you don't need to start
saving for your kids college when you haven't even paid
off your own college exactly. Also, if your retirement savings
(17:46):
have barely begun, or maybe they're just paltry, well, don't
save for your kids educational future. You need to make
sure that you're saving for your own future. It's wise
to operate from a position of financial strength when you're
looking to help others with their money. Joel, This is
this example is often used, but they always talk about,
you know, making sure that you've got your own oxygen
mask on your face in case of flight difficulties or
(18:06):
something like that before you help those around you. And
the same thing is true when it comes to your
own finances. Yeah, and you have the idea that you
can help your kid through school, you know, without taking
on much debt by saving for their college, But then
they're gonna have to help you out with your retirement.
That's a worst position to put your kid in. I
think better to have them have to figure out the
college thing than them have to figure out your retirement thing.
(18:29):
But but it's also important I think to point out
that the less you're able to save for your kids,
the more trade offs you're gonna have to make. But
we actually think that can be better for your kids
to have to make sacrifices and think long and hard
about those trade offs. I know, we want to give
our kids the moon, right. We want our kids to
have everything that they need. And lots of things that
they want to but that usually isn't the best move
(18:52):
for them. All you gotta do, matt Is, watch one
of my favorite movies of all time, Willy Wonka and
the Chocolate Factory, and you can see what happens to
spoil kids. You know you like the original one too, right,
you're not a huge fan of the new Johnny deppin,
I just pretend that one doesn't exist. Well, it's true though, dude,
Like if you always hand everything to your kids, kids
on a platter, Uh, they don't value the things that
they're given, right Like, And it makes sense to that
(19:14):
this applies to college because for twelve years, kids essentially
go to school for free, right. I mean, we pay taxes,
but we don't directly pay and so therefore I don't
think we value it, probably nearly as much as if
we had to pay for it out of pocket. Right.
In some instances, I bet we actually as parents signal that, oh,
school is not that important. You know, It's like, oh,
(19:34):
we can kick off, you know for a few days,
and you know, take a trip, take a family trip.
I'm not saying that the family trip isn't important. All
I'm saying is that it can be difficult for kids
to fully appreciate and value higher education. Yeah, so I think, yeah, life,
life is this continual series of trade offs, right, And
we don't want to hand everything to our kids just
because they want it. Just because they want to go
(19:56):
to the most expensive school out there doesn't mean that
that should be our goal to and that that's what's
best for the family. So yeah, why why not instead
be there with them as they encounter some of these
really important trade offs, some of these really important decisions
early on in their adult life. Your kids can graduate
college without debt, just by being intentional and with some
(20:16):
help from you. I feel like Matt. Sometimes parents believe
that student loans are the only option that then if
they don't say for their kids college, the only other
outcome is just a huge amount of student debt for
their kids. But there are so many other potential outcomes
in the middle that it doesn't have to be all
one or all the other. Yeah, man. And another reason
that that we think saving for college is overrated. Traditionally,
(20:37):
you save for college in a five twenty nine plan,
and these plans are specifically tailored for higher education costs.
But the problem is that college doesn't make sense for
all kids out there, And if you don't use the
funds in your five plan for college, then you're stuck
paying a hefty penalty in order to rescue that money
(20:58):
that's stashed there. So if your if your child chooses
a different plan of action then going to college, it's
going to be financially frustrating if you've prioritized college savings
too highly. But it's important to point out that you know,
if your kids opt to forego college, it might be
in their their own best interests. There are tons of
alternatives to four year college degrees out there. Yeah, foregoing
college might be in their best interest as a human
(21:19):
being and in their best interest financially, right, because there
are a lot of lucrative opportunities for people who don't
go to college if it's done in the right way,
I think, and I think blue collar work is one
of those ways. Matt like, the cool thing about the
skilled trades is that a lot of folks working with
their hands have little to no school debt and they
start generating income sooner. And since there's just like this
(21:41):
massive dearth of blue collar workers out there, pay rates
have gone up in a big way too, and the
blue collar route makes more and more sense for lots
of kids that are inclined in that direction. And so, yeah,
if people want to learn more about that, we we
talked with Ken Rusk about blue collar work and how
you can make more money doing it in episode two
seventies seven. But I think sometimes, uh, you know, in
(22:01):
this country, we've been so brainwashed to believe that college
is the only route for so many kids, that a
lot of kids go there they accrued, they accrued debt
that they don't need to, They waste years that they
don't need to getting an education they're not interested in,
when they would have been far better served going you know,
the blue collar direction from the get go. Yeah, not
only are there great blue collar jobs out there, but
there are plenty of non manual labor options for for folks,
(22:24):
like just different technology jobs right that that don't require
a four year degree. Like I'm thinking, maybe there's a
kid who's like just really into video games. Well, instead
of starting to to study for the s A T
during the summers in high school, maybe try taking a
a C plus plus course or another coding course. But
consider some of these alternatives to just solely focusing on
college because I think not only can you find uh
(22:47):
lucrative page well like you mentioned too, but like you
can just find a lot of fulfillment in these professions.
And it only makes even more sense if you already
have an interest in those specific topics. Yeah, entrepreneurship is
another route. You can be a blue collar entrepreneur. You
can mix mix both, right, You can kind of start
your own business on the side, or you can start
another business. Do you believe meets a problem that needs solving.
(23:08):
So like, with all the information I think to Matt
that's available to our kids these days, they don't necessarily
have to go to a liberal arts college in order
to begin to experience all that's out there. It's not
that the internet replaces the need for higher education, but
I feel like it does allow the opportunity for kids
to discover some of the things that they might be
passionate about a little bit cheaper in an earlier age too,
(23:29):
without having to pay a ton for for that college degree.
I feel like the first couple of years of college
for at least our generation, right, that's when we kind
of started to figure out what courses were being offered
what other people were pursuing, and we kind of started
to get that idea for ourselves. But kids these days,
there's so much at their fingertips that they can kind
of like scratch the itch on some of their curiosities
(23:50):
even earlier in life than ever before, and that can actually,
I think, lead them down the direction of entrepreneurship even
sooner before they even have to set foot on a
college campus. That's right, man. And so another reason too
that we we think that saving for college is overrated.
Who knows how far a college degree will get a
student after they graduate, right, Like, we don't know the
(24:11):
future per se. And to be honest, like that could
be an excuse to avoid doing lots of different things
because you can just say, well, like, who knows what
the stock market's gonna do. I don't know, I don't
I shouldn't invest. Who knows what the future holds. I'm
just gonna see here, I'm a bomb exactly. But it's
true that college might not be as an attractive of
a choice in ten the fifteen years. Right now, the
math still works for lots of kids to get a
(24:31):
college degree, but as the cost of college continues to rise, Uh,
we we feel that it's not as much of a
slam dunk because it used to be. It used to
be to work, getting a degree that meant pretty much
by default, you're gonna get a you know, pretty nice,
high paying job. But these days, getting a degree doesn't
automatically mean that you're gonna get a higher income like
it used to. Yeah, college degree used to equal ticket
to the middle class, right at least, and now it
(24:54):
doesn't in the same way that it used to. Although
you know, the stats still reveal, like you said, Matt,
that you do make more money when you have a
college degree, there are still a lot of other pockets
that make sense for kids to explore because college isn't
quite as worthwhile as it used to be. Another thing too,
to remember when it comes to saving for college, is
that we can get too caught up in saving for
the future that we neglect to invest in our kids
(25:17):
in important ways. Now, like saving for college I think
can become this like myopic goal, and it's easy to
forget the real goal, which is to raise kids that
are going to thrive in the real world. Right, So
maybe instead of like fully funding that five account or
even putting any money towards it. Consider spending more money
during the years that your kids live under your roof
to help grow their skills and their awareness. It's not
(25:39):
that saving for your kids college is the worst thing
in the world. I think it's just that people oftentimes
focus so hard on that they neglect some of the
experiences and places that they could be spending money now
on their kids that are going to actually have a
bigger impact on their ability to be productive citizens of
the world. That's right, Yeah, I mean you've got to
be balanced, right, And in a similar way that we
(25:59):
value craft beer, right, I mean, that's that's part of
why we have a craft beer on every episode, because
we want to demonstrate that we're trying to seek after
balance when it comes to saving for retirement, because if
you're only focused on retirement, right, like that magical fifty
nine and a half, you might get to that point
in your life and realize that like, oh, I guess
I should find some hobbies, Like, like, I don't really
have a life, I don't have many relationships in my life,
(26:20):
And so that's what we want to try to avoid
when it comes to our kids as well. And so
I'm just thinking of like family trips like learning an instrument,
you know, playing sports like these are all examples of
spending money that can help your kids become more well rounded.
And if you neglect those things in favor of building
a nine nest egg like that might be more of
a short sighted move. So chances are, if you're listening
(26:41):
to this episode, like you're into personal finance, right and
as you know, self professing personal finance nerds ourselves like
I can admit that it can be tempting to focus
on the money, the dollar amount in that nest egg,
rather than the intangible benefits that come with intentional and
quality time that we can spend with our kids. Money
isn't the fix for every single problem out there, and
so look to other ways to expand your kids horizons
(27:05):
beyond just assuming that a college degree is going to
be key for them to grow up into a happy,
functioning adults. So, all that being said, saving for college,
though it does make sense for some folks, it might
make sense for a lot of folks, and so we're
gonna talk about when that is, when it actually does
make sense free to save for your kids college, and
then how to go about it. Right after this, all right,
(27:35):
we're back and Matt. Of course, we do believe that
saving for college is overrated. We wouldn't put it on
the tireless episode if we didn't believe that. But we've
also relegated saving for your kids college to money get
number seven. Like literally, we did an episode at the
beginning of this year, episode three or two. We talked
about the seven money gears and you know when to
do what with your money and money gear number seven
(27:55):
is the last year and only if you're there, should
you even be considering, uh, say, being any money for
your kids college. We would say, that's how that's how
overrated it is. It should be the last thing that
you consider. Exactly. Yeah, it's it's in that like I
want to travel more and I want to say for
my kids college, Like those two things go together. I
think you know that those two things are in the
same money gear. But if you are crushing it, if
your finances are checking along, you've done a great job
(28:17):
investing for your own retirement, you don't have any of
that nasty credit card or student loan debt hanging around.
Then let's talk about how to go about saving for
your kids college in the most effective ways. Because Yeah,
there are some people, Matt who are doing a great
job with their personal finances. They want to start investing
for their kids college future. I understand that five plans,
we would say, are the best vehicle for doing so.
(28:38):
They aren't the only way. We're gonna talk about other
methods in a second too, but we should at least
start with five to nine plans first because they were
created for this very purpose. So yeah, kind of kick
us off. We'll talk about the pros and cons of
opening a five plan for your kids. Yeah, so plans,
I mean, the biggest reason that folks are opening these
is because of the tax break that you receive. Right,
(28:59):
All five twenty nine plans offer tax breaks on the
earnings that happened to be invested inside of that plan. So,
for example, if you invest ten thousand dollars and then
it grows to forty dollars over the years, you will
never pay tax on your earnings if you use those
funds for qualified expenses. And uh. In some states that
have state income taxes actually offered the additional incentive of
(29:21):
a tax break on the contributions that you make, and
so that's the case in the state of Georgia. As
well as more than thirty other states. So there are
a lot of states that have five twenty nine plans.
And so while you don't receive a federal deduction on
the amount of money that you invest into five uh yeah,
for a lot of states, you do get a state
benefit if you reside within the states. Yeah, And so
I think that that's the main reason. I think if
(29:43):
you're if you're doing well financially, to open a five
twenty nine account. It's like my kids in all likelihood
going to go to college. Most of the people in
our family did, and so we're gonna start saving now,
and we're gonna get the tax break. And I think
that's a reasonable reason to open a five twenty nine
plan and start that process. You can even use a
site like backer dot com to solicit contributions from your
(30:04):
friends and family, And so I think, Matt, this is
like perfect for a lot of people who maybe you're
tired of getting a bunch of gifts they create clutter
around like birthdays and holidays. Um, you're talking to the
right guy, the guy who hates clutter in pieces of
junk and plastic in his home. Oh my gosh. Yeah.
So so yeah, we're we're right now in the process
of downsizing our kids toy collection because it's just gotten
(30:27):
out of hand and and like that hang quickly. And
I know, like my parents are gonna want to get
them some sort of toy for the birthday this summer,
but I'm gonna be like one toy limit. And and
maybe if you want to give them more, maybe contribute
to their five account. Right, that's a perfect way like
it to destructure this is to say, ask your loved
ones maybe too to contribute to the five twenty nine
plan that you've started in lieu of additional presence. But
(30:49):
you're probably gonna need to let them give them one
or they're not gonna be not gonna be happy. But yeah,
five nine plans I think make a whole lot more
sense when you have other people, other loved ones who
are able to contribute. We'll put a link to that
in the show notes. But that's an easy way to
allow them to to contribute on your kid's behalf. Yeah,
So that's the biggest advantage of a five twenty nine
(31:10):
plan is that those earnings grow tax free, but you
do pay tax, you know, on the on the front end.
So essentially it's kind of like a roth ira a
where uh you get that tax break on the back end,
you don't ever have to worry about, you know, paying
tax on that money as long as you use it
for the right thing. That's the strongest argument four five
nine plan. But the biggest reason to avoid these plans
is something that we've already touched on. But if you
(31:30):
have kids who don't end up going to college and
you want to use those funds for other reasons, then
you're gonna have to pay for it. And so non
qualified distributions get hit with income tax plus an extra
ten percent penalty on those earnings. And so that means
that median households right now in the U S could
be paying between twenty two uh tot Like that is
a big bite out of that five twenty nine nest egg.
(31:51):
If your kids happen to not go to college. There
is some good news though, right if if your child
gets a full scholarship to college, then you you actually
won't have to pay the penalty at least that you
can avoid that ten percent, but you will still have
to pay income tax on that money, and that's also
up to that scholarship dollar amount. But you know, in general,
we we we do feel that the tax benefits of
five twenty nine plans are often oversold. For instance, let's
(32:14):
say you instead invested that money in a brokerage account,
you would be subject to a fifteen percent capital you know,
gains rate for most folks. Uh. And while you know
that's more than zero, it's also not the end of
the world. I guess what I'm saying is that if
you're not sure what it is that your kids are
gonna do, like maybe you don't have a history of
your family members going to college, maybe you have a
(32:35):
strong history of skilled labors or or artists, you know,
different folks who have maybe started their own businesses, then
maybe investing that money in a brokerage account might be
a smarter move for you. You You know, we we do
feel that avoiding taxes is smart. Right. Anytime you can
do that and you know that you're gonna come out ahead,
we would recommend that. But this is an instance where
you know you don't want to have the tail wag
(32:57):
the dog. In this case, you don't want to walk
a way those funds within the five twenty nine plan
uh and then be forced to pay a lot of
money in taxes or penalties because your kids don't actually
end up going to college. Yeah, that's like the worst
possible scenario that you don't want to find yourself in
or not, I mean not the worst like that could
be like trapped in a cave alone or something like
that. That That would be much much worse. That specifically would
(33:20):
be probably the worst thing for you. Probably actually come
up with a with a laundry list of things over
your words. But yeah, that is like when it comes
to a tax and money perspective, that's that's a bad thing, right.
You don't want to contribute a bunch of money to
the five nine account that you're not going to be
able to use, and that is I think Matt, you're
right that it's one of the biggest downsides. Let's talk
about two other ways that you can save for your
(33:41):
kids college. It doesn't have to be a five twenty
nine plan. There are other methods that are more flexible.
We're gonna talk about now. Are not accounts specifically created
to help you, say for your kids college, and that's
the five account, But there are other methods that you
can use that are going to crush you if those
funds don't end up going to to help pay for
your kids college. The roth Ira is such a great vehicle.
(34:03):
We're big fans of it saving for your own retirement,
and it offers more flexibility than the five plan two.
And that's a check mark in favor of going in
that direction over the plan direction, and a checkmark over
rowerdge accounts. Yeah, I mean I just mentioned that, just
like taxable brokerage accounts. But like if you have access
to a rath I mean, and you're not already maxing
it out, like yeah, yeah, then that should come first,
(34:23):
definitely before a brokerage account. Yeah, and before and if
you're under the age of fifty nine and a half
when you're gonna need some of that money to help
pay for your kids schooling, you can pull out contributions
without paying any tax or penalty. You can also pull
any earnings too. You will have to pay income tax
on that money, but if it's used for college, you
get to avoid the temper cent roth Ira early withdraw penalty.
(34:46):
It's still important to tread carefully when you're using the
roth ira uh money in your roth Ira for this purpose,
because you're likely going to need a big chunk of
that money to fund your own retirement. So it's not
one of those things where it's like you're you're hoping
to use that for your kids college. You're still hoping
that they're able to go to school cheaply enough, right,
and that you can find enough financial aid to lower
(35:07):
the burden and that you can hold onto your ira
A money for your own retirement. Um, but it is,
I would say for almost everyone, it's a better account
to be filling up before you even open the five Yeah.
Uh and then do Let's let's mention one avenue that
you and I are partial to. Real estate investing can
can be another route to help pay for college. You know,
you don't have to go the conventional route necessarily like
(35:28):
roth iras E accounts. They're great. But you know what,
if you love real estate investing like we do, dude,
I love the idea of building up a steady stream
of income over time via rental properties. That money can
help you increase your current income and it can be
used as a way to fund bigger lump some costs
like college down the road. You can either use the
recurring cash flow to help pay for your kids college expenses,
(35:51):
or you can even sell a property to pay a
tuition bill in full. Real estate investing isn't necessarily going
to be for everyone out there, but for those of
you who do have an interest in real estate, this
could be another way of thinking about paying for college
down the road. Look at a specific property, maybe assigned
that property to do a kid boom, you got college
taken care of us, right, Yeah. Especially, let's say your
kids three years old, they're going to college in fifteen years,
(36:14):
and if you if you really want to pay for
it in one lump sum, what you can say is like,
all right, I'm gonna get a fifteen year mortgage and
I'm gonna, you know, make a little bit of money
every month on the spread. And then in fifteen years,
I'm gonna sell this house and I'm going to use
that to fund their college. Like that's the one way
of thinking about it, right, There's a million ways to
skin this cat, Like assuming that they go to the
most expensive college of all times, right, because the way
(36:36):
real estate properties are going these days, that should be
more than enough to pay for college. But then again,
who knows what college is going to cost, uh eighteen
years and so so, man, I think you know infammation,
save me for college can be a nice thing to
do for your kids, But you don't have to save
for your child's college education to be a good parents.
And I think that's what a lot of people feel
(36:57):
innately right now, is like if I don't, I'm not
a great parent, or I'm not doing what other people
are doing for for their kids, and so I'm not
sacrificing enough, not feeling the pain. I'm like a B
minus or a C plus on the parenting scale. And
that's just not true. And of course it's hard to
reach all of the financial goals that we want to achieve.
It'd be nice, right if we could max out our
(37:17):
four O one k I RA playing nhs A like
that would be that would be like a perfect ideal world, right,
if you can do all the above, But it's important
to not let your financial priorities get out of order.
If you can take that all the above approach, more
power do you like if you're if you've got that
kind of income and that kind of frugality level, like congratulations,
But you are the anomaly in this conversation. And there
(37:38):
are a lot of reasons that saving for college isn't
all it's cracked up to be, even though it's a
worthwhile goal to have in the future, as your personal
financial situation continues to get stronger as you build wealth,
maybe down the road you can start to put away
little dribs and drabs, you know, open up a five
account maybe. But it's a really low priority in in
the scheme of things, that's right, man. Yes, hopefully we
(38:00):
have adequately convinced you that saving for college is overrated.
That's something that, uh, you can do, but it's not
something that you have to do, all right, Joel, Let's
get back to the beer that you and I enjoyed
on this episode. This beer is technically a homebrew from
our friend Jess and and he brews under the Moniker
easy Chair brewing garage. Uh, and this is what he
(38:21):
calls his bass stout recipe that went through a second
fermentation with coconut shavings. Joel, what were your thoughts on
this beer? So I think he was actually gonna name
this beer Matt is my favorite how to Money house,
but he didn't want to make me feel bad, and
so I appreciate that. Jess, but that would have been
a good name for this one. But I thought this
was really good. Dude. One should have just been called
Matt and then we're actually gonna have another one by him,
(38:41):
and he could have just called that one. Joel, that's
that's the peach Sheltzer. I feel like you kind of
got this peach summertime vibes going on, Joel. I appreciate that.
I don't know if that's a compliment or not. Yeah, uh,
it's probably both at once, and I'll like it. I'm
fine with that. But man, I really like this one
because it had an adjunct, which is just anything else
you put into a stout, like you know, like coconut
(39:03):
and coffee. Sometimes it's a popular adjunct when it comes
to stouts, but sometimes breweries overdo it, and I feel
like the pastry stouts are a prime example of that.
Sometimes it's like I'm actually eating a doughnut and it
it feels like too much. It's overwhelming, and I'm like, man,
I actually want to taste the beer. I actually want
to taste the stout, not just the sprinkles it Like,
I didn't want to actually have to chew my beer
(39:25):
this time. But but yeah, you're saying that that's not
the case. This time, but sometimes we do have stouts
that are like that where it's just seriously too thick
this is on beer. But yeah, I agree, man, it's
got like the perfect amount of coconut going on. He
was light on the touch with the coconut, but yeah,
it's like it's there, it's present, it's adding something lovely.
But the stout the base itself is just really delicious too.
So man, I think Jess is getting his game together
(39:47):
seriously on the homebrewnk. A lot of times when it
comes to homebrews, like there's a different scale in my
mind because like it's always like no for for homebrew,
this is pretty good, but this, like this is like
for a beer, this is good, Like I would pay
for this. Uh. This actually reminds me Creature Comforts that
they released a bunch of kind of special stouts there
in there at the brewery that they don't ever release
(40:08):
or bottle or can or anything like that, And this
reminds me of one that I had actually there in
the brewery. But like it almost has a milky quality
to it. It's just really smooth, almost almost creamy, like
you said, the coconuts just right. I feel like it
tastes kind of like their their cocoa bunny porter. Oh
maybe maybe that's it, like I was, I think I
was picturing like I can't remember, like the tree that
owns itself or something like that. They've got all these
(40:28):
different stouts there, but it does. It kind of has
that cocoa bunny action going on. This is a really
great stout and it deserves a name. Uh we should. Yeah,
we gotta convince Jess to name his beers. This one
he just labeled number one since since he gave his
two beers. But uh, yeah, this one's really good. I'm
glad that he donated this one to the show. And
again even though he donated it, like I would by
(40:48):
this beer in the store. Totally Yeah, I feel like
we already named it for him. Matt is my favorite
and how the Money House, and I'm gonna agree with him,
You're you're my favorite. How the Money House? Too sweet?
All right, Well, that's gonna do it for the love
fest and in this episode. But for folks that want
show notes and some of the resources that we we
mentioned on this episode, just go to our website at
how to money dot com. They'll be up there for you.
(41:11):
That is true. And something else that is true is
that when you leave us a review, it helps the
show positive and Angel gets its wins every time the
bell already, it really does help others to find the show.
And actually I saw a recent review that was left
for our show and they said that they found the
show because it was recommended within their podcasting app where
they listen to podcasts, and so these positive reviews they
(41:32):
help out in the algorithm and when it comes to
other people discovering and finding the show. So sometimes you
might think that's something that they just always say, but no,
for real, we really do mean it, and it's why
we we do consistently ask for those reviews. So if
you haven't left us a review wherever it is that
you listen to your podcasts, we would love it if
you did that, and thanks in advance, no doubt. All Right,
that's gonna do it for this episode. Until next time,
(41:53):
best Friends Out and best Friends Out
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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