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Grappling with College Costs
At a recent holiday barbecue, a group of our friends had a “lively discussion” about college and what we expect for our kids. Collectively, our kiddos range in age from 7 to 14. Some of the main questions that came up:
Should we encourage our kids get a general liberal arts degree like history or English, if that moves them, or push them into something more practical, like accounting or computer science?
Is it money-smart to encourage our kids to go to community college or a cheap local school so they can live at home for their first two years? Would transferring into a bigger/more challenging school their junior year be OK, or will they miss out on having that quintessential four-year college experience?
Would we encourage our kids to pay for part of their college education, even if we could afford to pay for it ourselves? Does paying help kids feel like they have some “skin in the game”—in other words, give them a sense of accountability?
On the issue of how practical a degree should be: Most of our group fell into the camp of “a good education is its own reward.” However, a couple of us definitely leaned toward “It’d be nice to have a solid career track and some practical experience when you walk out of college.”
I can see both points of view. I studied communications, so I had some idea that I’d be working as a writer/ journalist/ public relations-type person. But I sure did envy the accounting majors who had recruiters coming to see them on campus, and often had job offers even before they got their diplomas. Overall, though, I’m still in favor of kids studying whatever seems like the best fit for their “career path guess.” And isn’t it really an educated guess? I mean, how many people know for sure what career path they’ll follow when they’re 18 years old?
It seems to me that college is a sorting ground: You take classes to help you decide what you enjoy and do well, and what areas of study are definitely not your cup of tea. My own bias is that if you end up finding that you’re passionate about history—even if you’re not going to teach or work at a historical society—chances are good that your history studies will somehow end up being meaningful in whatever work you do. You’ll understand historical trends, and you’ll know how to research and communicate well (as a result of the papers you write). Those aren’t bad skills to have in any job, right?
But my practical side says that if I were to do it again—and this is how I’ll counsel my own daughters—I’d take a few business courses, too. Maybe statistics and marketing. I could certainly use those skills while running my own writing business.
If your kid is paying for at least some of their college expenses—which I think they should—that will also encourage them to make their degree worthwhile. I was fortunate that my own parents paid for my tuition and room/board. However, I was expected to work during the summer to pay for books, clothes, gas/car insurance, entertainment and any extras.
And the deal was that my parents would have paid tuition and room/board for 4 years only. If I dinked around and took 5 years to graduate, that last year was on my dime. Graduate school would also have been my responsibility. I did think long and hard about it, and decided an advanced degree wasn’t really crucial in my line of work. But had someone else been paying, I might have gone to grad school, and it wouldn’t have been cheap.
Where do you stand on the concept of kids paying for part of their education, even if mom and dad can afford to pay every penny? Good life lesson or stingy parenting?
As for going to community college or a local school, then transferring—I honestly don’t know how I feel about that. I know many financial experts—including syndicated radio talk show host Clark Howard and Kiplinger’s Janet Bodnar—are heavily in favor of it.
I personally loved being at a small university for a full four years, getting to know my teachers and students really well. But I also agree that it sure would save some $$$ to have our daughters take most of their basic prerequisite classes at a cheaper school like a community college, then move on to a larger school.
If any of you transferred to a bigger college after two years, what do you say? Was it a tough transition or a smart move?
And where do you stand on the issue of your kid getting a “practical” degree like accounting, versus a more general degree like English? Are both equally worth the incredibly high price tag you’ll pay these days?
Beyond an Allowance: Money Management for Teens
When she turned 13, our oldest daughter stopped getting an allowance. Instead, we put her “on salary.” She gets a lot more money than ever before. She loves that. She’s also responsible for more of her own expenses than ever before. Her dad and I love that.
We can’t take complete credit for this idea. Mary Hunt over at DebtProofLiving.com based a good part of her book Debt-Proof Your Kids on this exact concept. And Susan Beacham, another of my favorite family money gurus, is a huge fan of giving tweens and teens more control over their finances. I’ve interviewed both of them for my personal finance articles, and I couldn’t wait to use this approach in our family.
Here’s how it works, in a nutshell:
- We pay our daughter once a month. No more weekly allowances. It’s time for her to practice making her money last longer, just as if she were working at a real job.
- We give her money for everything we normally would spend on her. That means:
- Clothes & shoes
- School lunch money
- Gifts for friends and relatives
- Cell phone minutes. (She has a pay-as-you-go plan; when she runs out of money, she runs out of minutes!)
- Movies, snacks and other entertainment with friends. (We pay if we go somewhere as a family.)
- iTunes songs, books and magazines
Yes, it’s a LOT more money than our daughter used to get for an allowance–more than $100 a month. But it’s not costing her dad and I any more than before. This is $$ that was already part of our family budget. We’re simply handing the money over to our daughter instead.
- There are requirements. Our daughter must set aside a % of her money for long-term savings (college) and donating (her choice where it goes) right off the top. She needs to have a 5-minute “budget meeting” with her dad and I every month before she gets paid. She fills out a little budget sheet (at left) to plan where her money will go in the upcoming month.
She’s also required to keep her receipts and jot down all of her expenses during the month, so she’s aware of where her money goes. We review those together at the end of each month. But her dad and I don’t tell her how to spend her money or criticize her choices after the fact (even when it’s tempting!). After all, we want her to make a few mistakes now, while she’s only buying little stuff like jeans and lip gloss. Hopefully, she’ll have a better handle on money when she’s ready for bigger stuff, like college loans or cars.
- The setup is simple. We use a cute notebook (see top image) with zippered sections for each spending category. She keeps her cash in these zippered compartments until she’s ready to spend it–very much like an “envelope system” for an adult budget. Her long-term savings goes to the credit union.
The result? So far, so good! We been doing the salary system for about four months now, and I keep expecting some meltdown or unexpected expense–but nothing so far.
You know who this is hardest on? Me. Every time I instinctively pick up a cute pair of jeans in my daughter’s size on sale somewhere, or see a book she might like, I have to put it down and remind myself: My daughter is in charge of her own purchases now. And she’s great at it.
“Extreme” Disney savings & fun
Our family hasn’t been to Walt Disney World yet (since we’re on the West Coast), but when we do, we’ll be taking a copy of my friend Kate Reilly’s book with us. It’s Walt Disney World Resort Extreme Vacation Guide for Kids. Read about it here. The cool thing is that it’s a travel guide for kids, not just for parents. Kate’s sons coauthored and helped illustrate the book.
Kate and her crew offer all sorts of ideas on how to have fun and save money with Mickey. For instance, I wish we had thought of their idea to make our own spiffy autograph book (rather than buying them at the park) when we went to Disneyland. The Disney books were spendy and just meh, nothing all that special. Another idea: Having kids make no-sew water bottle carriers, then filling, freezing and taking in your own water. Simple, smart.
Kate even offers an entire chapter on how kids can earn their own money for WDW Souvenirs. Ah, a mom after my own heart.
By the way, Kate’s blog, Polka Dot Suitcase, is really fun, too–lots of crafty activities and ideas for families. Kate is a homeschooling mom and those home-schoolers just seem to come up with the best ideas. Trek on over there sometime!
Flexible spending accounts become less so
Just read a helpful article by Gregory Karp about changes in FSA accounts for 2011. The highlights: You won’t be able to get FSA reimbursements for over-the-counter medications like pain relievers. Well, you CAN, but you’ll have to get a prescription from your doctor recommending the OTC med, and you’ll have to provide both the prescrip and the receipt to your FSA plan for reimbursement. Who wants to hassle with that just to get repaid for some Tylenol?
You WILL be able to still use your FSA for OTC “equipment” which I guess include bandages and contact lens solutions. Thank goodness for that! Lens solution is expensive!
The other big change coming in 2013: You’ll only be able to put a max of $2,500 in your health FSA–half of today’s limit. Annoying, but good to know.
Coming clean about laundry detergent “dosage”
This is on ongoing issue in our household: How much of the cap do you fill with liquid laundry detergent?
I swear the detergent makers mark those little lines (1 load, 2, 3) so faintly that NO ONE will ever fill to just the “1 load” line– don’t you think? We have a smallish front-loading machine, so I know we can get by with the minimum amount of detergent. I can’t totally prove this, but I strongly suspect that when they do laundry, my husband and oldest daughter fill the cap willy nilly. The more detergent, the better, right? The laundry will simply be cleaner, right?
Not so! And finally, someone else agrees with me. According to this post from WalletPop, using too much laundry detergent not only costs you extra money buying soap, it can also gum up your machine and prematurely age your clothes. I knew it!
There’s a suggestion from Seventh Generation laundry detergent company co-founder Jeffrey Hollender that in many cases you can actually get away using NO soap at all; that the water and washing machine agitation does wonders for removing light dirt. I’m nixing that in this household. Way too many underpants around here to consider taking that risk! How about you?
Off to mark the “1 load” line on our laundry cap with a marker pen!
Switch your debit card back to an ATM card
Are you wary (as I am) about the safety of using debit cards (read my Reader’s Digest article about that)? Or would you rather not be tempted to overspend with your debit card? If so, did you know that many banks will let you “turn off” the point-of-sale purchase function on your card? Each bank or credit union has a different process for doing this, but try asking your financial institution to set the limit for all debit transactions on your card to “zero.” Voila! Your card is just an ATM card again. Read more about it on ClarkHoward.com.
Losing weight? You could lose your debt, too!
So I started attending meetings of a popular weight-loss program in the fall, to finally lose that last bit of post-baby weight (does it matter that my “babies” are school-age now?). I’m sticking to the program and it’s working. But quite interestingly, our family budget is shaping up along with me!
Why? Turns out that a lot of the strategies for successful weight loss can also be applied to your finances. But maybe you already knew that. (more…)
A tribute to the guy who taught me all about “family money”
My dad, George Van House, died in September, just days after my last post about our family doing a “frugal month” challenge. I was devastated. He was my last living parent, and the person who really taught me everything I know–and value–about family money.
We continued to have a pretty frugal September after his death, but there were a few extra grocery purchases and eating-out fests with family. Plus, I just didn’t have the energy to cook that month. But you know, that’s OK. Everything changes when someone dies. It should.
I’ve had lots of time to reflect on my dad these past few months. And I wanted to put down in “ink” some of what he taught me about family money. So here goes. If you follow me, you’re a trooper. If not, this one’s for Dad.
My dad was a frugal guy, a kid of the Depression. Grew up in a rural part of Nebraska. Said Christmas was all about a big meal and getting a piece of fruit and candy in his holiday stocking. He loosened up a bit as he got older, but he never squandered money. He was a faithful subscriber to Consumer Reports. He read grocery ads and clipped coupons when my mom was too busy. He researched pretty much every purchase he ever made.
After my dad retired, he did taxes part-time. He also golfed with some folks who were more well-heeled than our family. From them, he started to learn about investing. I admired that about him: That he never stopped learning, that he always listened to people who were doing things differently to see if there was anything he could borrow from their wisdom.
And yes, my dad did have chats with me about money. But more than anything, I remember what he DID about money. I learned more from his examples than from his words:
He had a budget. He never explained it to me, but I often saw my dad entering figures onto green ledger paper. (This was in the days before computers). Dad always used a mechanical pencil (the kind with lead you twist down) so his point would always be sharp. One time I looked over his shoulder (he wasn’t into sharing his financial details, so I had to be quick!) and saw that he was putting things into categories on his ledger paper: Mortgage, Groceries, Restaurants. That sort of thing.
When I graduated from college and had a very tiny salary to manage, the first thing that occurred to me was to buy ledger paper and sort my sorry little dollars into categories so I knew I had enough to cover essentials. It wasn’t really even a conscious choice. It just seemed like the natural thing to do. Someday, I trust that my daughters will adopt some of my financial habits just from watching me (though they hear me talk about it, too, and are wildly bored right now!)
He comparison-shopped. Again, not something Dad ever really talked about. But I saw him look at the grocery store circulars each week and make a little list of what to buy (on sale) at two or three different stores. He was able to match the sales to coupons like no one I’ve ever seen! Me, I just use TheGroceryGame. They do the sale-and-coupon matching for me. But I definitely learned the concept from my dad.
He researched big purchases. Consumer Reports was his purchasing Bible. Not only did he want to buy things at a good price, he wanted them to LAST. I admit: I’m a CR subscriber, too. It just feels wrong to buy something moderately expensive without checking out the reviews first.
He avoided debt. And he tried to get me to do the same, though I didn’t always listen. I begged to open a credit card account in late high school. Dad spent many hours explaining to me how easy it was to run up a balance and pay unnecessary interest. I insisted that I needed to build my credit history. Dad eventually gave in and cosigned my credit card application.
I actually did fine with credit until my last year of college. By then, I was tired of living on the edge, with money only for essentials and perhaps one pizza a month. I’ll never forget the day I bought on my credit card a much-envied pair of black jeans from the Gap–$30 that I absolutely couldn’t afford to part with. I didn’t pay off that credit card bill right away, and the interest dinged me for MONTHS. I was too ashamed to tell my dad that he was right. But he was.
He let me make financial mistakes–after fair warning. Such as my credit card dilemma, above. An even bigger mistake: He let me buy a car I couldn’t afford, right before my senior year of college. It was much too expensive for someone with a less-than-part-time income. A slightly used Honda Prelude for $7500! That’s even a lot for a college student today. I actually wish he had talked me out of it. Not only did the payments sometimes overwhelm me ($150 a month for seemingly forever), I hadn’t anticipated repair costs. Nor did I know much about preventative maintenance for cars. A bad combo all around. I had some very stressful moments my last year of college, trying to negotiate repair costs with an auto shop. But I’m grateful he let me try my wings a little. Better to make mistakes early in life than later, when the stakes are bigger.
He was my family banker. Dad financed the purchase of my Prelude–I paid him back instead of a bank. He later did the same when my husband and I bought another car. But he was all business about it: He insisted on using a contract and charging interest. Terms were explicitly spelled out: The payment due date, the charge for paying late, etc. At the end of my loan term, my dad gave me back my final payment as a gift–a lovely surprise! He did the same for my husband and me on our later car. And we paid him faithfully: I would have rather paid another creditor late than disappoint my banker-dad!
He invested regularly but conservatively. Dad learned about bonds from his retired golf buddies. He liked them all: Local municipal bonds, government bonds and bond mutual funds. He wasn’t interested in investing in anything flashy. And to be fair, he didn’t start investing until later in life, so bonds were a good choice. He knew he probably didn’t have 30 or 40 years to watch his investments rise and fall. He wanted them to plod along, earning conservative amounts of consistent income.
For this one trait, I thank my lucky stars. When I took over my dad’s financial affairs after he developed dementia, I didn’t have to touch his investment choices. I just watched over them. And when the market crashed in 2008-09, Dad’s investments remained virtually unscathed. That gave me great peace of mind.
Finally, he was a giver. As frugal as he was, my dad (and my mom when she was alive) felt strongly about philanthropy. He always gave money to favorite causes, from his church to the Parkinson’s Disease Association to families he knew were going through some hardship. I see now that he really got as much out of those donations as he gave. He earned a great feeling of being useful, being part of his community, being grateful for what he had in life. I hope to be able to do the same.
For all you’ve taught me, Dad, I thank you. Life won’t be the same without you.
September: Our Savings Month
Our family is on a “no-nonessential spending kick” for September. Why? We had a few hangover bills from a summer vacation and three unexpected car repairs. So a spending freeze seemed like a sane way to get our budget back on track.
Now, we’re pretty careful with our money anyway, so I thought, “How hard can this be?” Well, it’s only September 2. And I’ll tell ya the truth: It’s very, very hard!
I read a suggestion in financial celebrity Suze Orman’s 2009 Action Plan (which I downloaded for free; you can still read the first chapter here). It was: Don’t spend ANYTHING for one day. So during the last part of August, I kept trying to do that, in preparation for September. Emphasis on “kept trying.” I’d think: OK, this is an easy day to spend nothing. Then we desperately needed milk. Or it was my “mom’s night out” and I wanted to buy a cup of coffee with a friend. Or I needed to send in a check for my daughters’ lunch money.
So I’d put off the “spend nothing day” until tomorrow. But the funny thing was that something kept popping up—sometimes a need, sometimes a very strong “want”—and I found it really tough to go even one single day without spending at least a few bucks! I wondered: How the heck are we going to get through September? (more…)
