How Much of My Children’s College Education Should I Save and Pay For?

Filed in Money by on April 2, 2015 1 Comment


Education savings



This might be one of the most difficult financial decisions parents have to make. Every household has limited finances, and the cost of a college education has skyrocketed in the last couple of decades. Also, many professions now require a master’s degree (post-college graduate education), so it is not unlikely that you will be asked to help pay for this as well. So how much should you pay of your children’s college expenses?

Entire books have been written on this subject, so this blog will not be exhaustive. I will offer what I hope are a couple of useful perspectives.

Should You Just Have Your Kids Pay Their Own Way?

This is, of course, one option. You just inform the kids that they will need to pay for all of their own college costs, by working during college and taking out whatever loans are necessary. Sorry, while this is convenient, I view it as somewhat of a copout. The usual reasoning is that paying their own way will “build character.” Yes, having your kids pay at least some of their college costs will likely build some character, and it makes sense for many families to have both the child and parents sacrifice for such a worthwhile goal. However, if you don’t help at all financially, your child will rack up very large loans that will likely take decades to pay back, which will cause them quite a bit of difficulty and suffering. I believe you should try to help them as much as you are reasonably able, given your income and finances.

However, keep in mind…

“You Can Borrow for College, But You Can’t Borrow for Retirement”

This is well-established financial planning maxim, and it is important for you to understand. To finance college costs, your children can obtain grants and scholarships, and both you and they can obtain low interest loans. There is absolutely no such assistance available to help you finance your golden years. You deserve a secure and happy retirement, so do not spend so heavily on college that you jeopardize it. You might want to work with a financial planner to determine how much of your savings need to go toward your retirement for you to be relatively secure in your later years. Then, do not invade these funds to help pay for college expenses.

The In-State Public, Out-of-State Public, or Private College Decision

I’ve never understood why so many parents send their kids to out-of-state public universities, especially if you live in Illinois or another state where there are excellent public universities. In these days of sky-high college costs, it is particularly important to view the college decision as an investment decision. You and your child are investing X amount of dollars to finance a career that will produce Y dollars over their lifetime. Out-of-state universities are almost always much more expensive than in-state ones, so this decision should not be made lightly.

There can be good reasons to allow a child to attend a higher cost out-of- state school. If an out-of-state college has an outstanding academic program for a particular major, for example, then it might be worth the added cost. However, if your child wants to go to Arizona State just to follow the sun, or to follow their girlfriend or boyfriend, then you should put the kibosh on it.

If your child insists on going to an out-of-state school against your wishes, a good way to handle it is as follows. First, explain why it makes sense for them to choose an in-state school. Then, if they persist, rather than just saying they can’t go, tell them that you will only provide the same amount of financial assistance that you were going to provide for the in-state university, and that the extra cost of the out-of-state school will be borne by them. If they decide to still go out-of-state, follow through with your decision and make them bear the extra cost. It might seem a little harsh, but you cannot be expected to jeopardize your current lifestyle and future retirement for their unwise decision.

Last, a private college, while usually extremely expensive, can be a good decision if it is an outstanding school. If your child can gain admission to a highly selective private college, the degree they obtain could be a huge boost to their eventual career. Many of these colleges offer scholarships for highly qualified students and generous financial assistance to students from lower-to-middle income families, so the cost to you and your child might not be as onerous as you think. But again, don’t jeopardize your retirement to have your child attend one.

Funding Graduate School

It is a somewhat unfortunate fact of life these days that career advancement in many fields, such as business and teaching, often requires a post-graduate degree. The only advice I can offer to you in this regard is that some employers will help pay for some or all of certain of their employees’ graduate education. Some companies will pay for an MBA; many school districts help pay for teachers’ master’s degrees; and certain social service agencies are qualified for federal or state loan forgiveness for social work post-graduate degrees. You might counsel your child about the availability of these programs.

I hope these perspectives on funding your child’s college expenses are helpful. Good luck to you with this difficult decision. Do the best you can to help your child get a good education, but don’t “burn down your own house” in the process!

About the Author ()

TIM MCINTYRE retired in 2004 from his position as president of Applied Systems after facilitating a successful sale of the company. At only forty-six years old, he made the unusual decision to fully retire to pursue other interests and simply enjoy free time. As a hard-driving Type A personality, this turned out to be a significant challenge for the Notre Dame and University of Chicago-educated MBA, CPA, and Certified Cash Manager.

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  1. Leslie says:

    Thanks Tim 🙂

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