By Guest Author: Lawrence J. Annello, CPA/PFS, CFP®
How your young-adult children fund their higher education expenses can be an educational experience in itself. Especially when taking on debt, there are important, early lessons to be learned in the dynamics of financial management. Beyond just providing the funding, by serving as your child’s positive role model, the decisions they make today can have a profound ripple effect on the rest of their healthy financial lives.
Scholarships, Debts and Difficult Decisions
As a financial planner and proud father of three college graduates, I am very familiar with the costs of a college education at both public and private institutions. I’m also privileged to be current Chairman of the Scholarship Committee for the Exchange Club of Farmington, where one of our goals is to recognize deserving high school students who have excelled in academics, community involvement and extracurricular activities.Because I’m personally familiar with the daunting numbers involved, I empathize with every applicant who indicates that it’ll cost $60,000 or more to attend his or her college of choice. But of course we have only so much funding to go around. To make the most of it, we award nontaxable scholarships of as much as $2,500 per recipient, which allows a number of promising students to purchase the most powerful, name brand laptop to help them excel. With any luck, the computer lasts all through college; the benefits of the one-time scholarship are enjoyed for multiple years.In the meantime, colleges generally offer more substantial financial aid packages, but often as burdensome loans, to be repaid with interest over as long as 20 years.
I’m often left scratching my head and wondering whether such “aid” helps or hurts its recipient in the long run. That’s not to say that all student loans are wrong or ill-advised. But in this case, we recommend you look that gift horse squarely in the mouth before including it in your stable of funding solutions. It comes down to how you and/or your children are going to pay for undergraduate educations that could easily cost more than what you spent on your first home. And you had 30 years to pay for that debt with tax-deductible mortgage interest.
The Best “Scholarship” You Can Give Your Child Is a Role Model
A financial life planning professional can help you and your college-bound kids analyze the numbers involved in college funding. But I believe it’s equally essential for us to be prepared to serve as our children’s responsible role models, to help them make good financial choices for themselves. This doesn’t mean you have to be a financial analyst yourself. Quite the contrary. Let me illustrate what I do mean with the story of Chia-Yi.
Every year I find myself touched by the families I meet through the Exchange Club of Farmington. Giving back to others and my community is one of the most heartwarming things I enjoy. Without a doubt, it is one of the activities that allows me to Appreciate The Wealth of My Life.
This year has been no exception, as I was privileged to meet high school student Chia-Yi and her family. Chia-Yi spent the first three years of her life in Taiwan, being raised by her grandparents in a small, one-room home that doubled as her grandfather’s barber shop. She told me she remembers how hard her grandpa worked cutting hair to pay for the family’s food and shelter.
By trusting the care of their daughter to their parents, Chia-Yi’s mother and father were able to leave Taiwan and complete their own college educations here in Connecticut, paving the way for a contribution to Chia-Yi’s college education fund. At age 4, Chia-Yi emigrated from Taiwan to Connecticut and rejoined her parents, leaving behind her loving, hard-working grandparents who had instilled in her and her parents an incredible set of family values and work ethic. Today, Chia-Yi is a National Honors Student fluent in three languages, and plans to study International Business in college – a tribute to her grandfather and his barbershop.
This is what I’m getting at when I speak of role models and how important they are to our children. In fact, I like to ask each applicant at the end of their interview: “Please tell me about a role model in your life.” I found Chia-Yi’s quick response to be among the most touching I’d ever heard.
“Can I name more than one?”
How much personal or family debt is justified as the means to the end? How do you weigh today’s staggering costs of higher education against the solid evidence that college degrees continue to yield measurable and immeasurable value alike for those who make best use of them? Alas, there is no one-size-fits-all answer. But by leading with parents, guardians or other caregivers to serve as role models for hard work and determination, I believe our children will be much closer to finding the solid answers they seek. Where there’s a will, there’s a way!
Sage Serendipity: As for being our children’s role models, did you see Volkswagen’s powerful Public Service Announcement on why you should never text and drive? Well worth watching — and sharing.