My old alma mater has become insanely expense since I graduated college. Not every student is on scholarship,
I wonder whether paying full price for my kid’s college would really be a good investment. What if parents just gave their kids the money instead?
Option 1, give an 18 year old $200,000. Yeah right.
Option 2, buy your kids a house. Let’s assume that by the time my kids go to college, their education will cost $50,000 per year with tuition, room, board, books, and an Apple laptop. Now we take that $200,000 college fund and put it into a $200,000 house. A 30 year mortgage on that house would cost the little buggers $430,000. The free house on the other hand saves them the cost of a mortgage and gives them the value of the house for a total of $630,000 benefit to them. Option 3, buy your kids retirement.
Put that $200,000 into a 47 year CD with a 5% rate of return and when the kid is ready to retire at 65, that $200,000 will be worth $2M. Compare that to the almost $1M a college education is worth over a lifetime. I didn’t need college to tell me that $1M is more than $2M.
Option 4, keep the money for yourself.
Of course, college provides intangible benefits: appreciation of art and culture, social networking, a coming of age story, Ramen noodles, late nights studying, terrible stress every three months, and communal bathrooms. Such good times in fact that l’m sure my kids won’t mind working and borrowing to pay their own way (at least part of it). Like I’d really have $200,000 to spend on their education anyway.