College as an Investment, Not an Expense
By Joe Globensky, RFC®
As a financial advisor, a lot of the advice and counsel I provide to clients applies to me as well. We may have parents whose health care needs impact us financially. We all want to retire someday and need to fund this goal. And many of us have children who may want to obtain higher education and we need to find a way to pay for those expenses.
With 18- and 16-year old children at home, I am very aware of college costs. And I have written in previous blog posts about ways to save for college and why it’s important. But I want to shift the conversation towards why we should look at college and its related costs as an investment rather than an expense.
In a traditional investment, you invest money with the goal that over time your reward at the end is worth more than the amount you put in. Well, isn’t college very similar? You invest in your child’s education with the hope, maybe expectation, that over time, their reward is much greater than the initial investment. By shifting our thinking, we may begin to analyze this investment a little differently.
Analyzing College as an Investment
Our 18-year old has ALWAYS disliked school. While his grades were decent, he never enjoyed the daily grind of school. When he graduated from high school, he wanted to study to be an art teacher. We chose to analyze an investment of $20,000+ for one year at a university, compared to an investment of a few thousand dollars at a local community college.
We also looked at whether he would benefit socially from a dorm experience like we had. And, if something clicked at community college, would he be able to easily transfer to a university? What if he decided to change his major? He has. What if he likes work more than school? He does. Is there a trade school in his future? We analyzed a lot before deciding on what might be a good investment for his situation.
Conversely, our 16-year old likes school. Next year will be her third year in high school focusing on forensic science. She is taking dual-credit courses which will give her credit for one semester of college. She has been involved in extracurricular activities. She has researched universities and will soon go on visits. We will use some of the same criteria in analyzing an investment in her education.
Making the Investment
So, how do we go about making these investments? Early on, we started saving in a 529 College Savings Plan. The earlier you start, the easier it is when it comes time to invest in a specific school or schools. What currently seems like a small, monthly payment in a 529 Plan, can lead to much easier decisions on the journey from high school to college.
We can help you structure a plan for your children or grandchildren that can assist when it’s time to make their journey to college. Our financial advisors have been through it, can help answer your questions, and get you prepared. Visit our website, contact us at (217) 605-8130, or go online to schedule a free, no obligation consultation. There’s no better time than now to plan for the future.
Content in this article is for general information only and not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
Follow us on social media for more tips on financial planning.
By K. Bridget Schneider, CFP®, CRPC®The shift from saving for retirement to taking income in retirement can be a tricky proposition. You may feel comfortable enough to retire when your retirement savings reaches a certain level. However, that may not be...
By Joe Globensky, RFC®In recent years, there has been a renewed emphasis on the relationship between wealth and health. Various studies have shown that the relationship is a gradient, meaning there are discrepancies at every level of the economic ladder. ...
By K. Bridget Schneider, CFP®, CRPC®The S&P 500 reached its peak in mid-February of this year, and investors were feeling good about their account values. However, in the following weeks that good feeling began to disappear. Concerns of a pandemic...
On March 12, 2020, the S&P 500 entered a bear market for the first time in 11 years. And this bear market could go down as one of the most severe in history given how quickly it occurred after reaching a new high in mid-February. But this is not the first bear market we have experienced, nor will it be the last.
By Joe Globensky, RFC®Hopefully I don’t have to tell you how important it is to keep your personal data safe. Whether it’s your social security or bank account numbers, information from your driver’s license, or items that can be pulled from your social...