On twitter, I saw a promoted link from a well known financial service company. It was a link to video about how a family forged a path in investments to not only send their four children to college, but to also have their own golden retirement. As I watched this short video, I kept waiting for specifics, but turned out to be nothing but marketing fluff.
There was a sweet description of how this family was formed. The family realized it was better to live in a smaller house rather than a mini-mansion. This prioritization would make it possible for them to send all four of their kids to college with good, solid investments. The parents were also happy that they could split their attention equally with their own retirement. In the end, they wanted to be the “party grandparents” meaning they hoped in retirement, their kids and grandkids would be visiting them often.
See any issues here?
For an ad showing the power and value of investing in your child’s future, the video had little concrete info.
- Is this financial institution succeeding in sending high school graduates to college?
- Are people coming in short of needed funds?
- What about the people that saved up money in these plans, and their kids turned out to not want to go to college?
Studies show that parents aren’t saving enough money to send kids to college. But what is the core reason behind that? Parents are lazy or not doing things right? Or is it because the cost of college in relation to average income has risen? It’s a complex issue, because while tuition has been rising, the number of dollars in various forms of student aid has risen as well. Essentially, it may next to impossible to predict what college will cost when your kids get there. But this video talked about none of that. Instead, the two concrete things it mentioned were: buy a smaller house, and split your investment dollars 50/50 between your kid’s college and your own retirement.
- Investing for college means investing in mutual funds
- We are only talking about college. Other vocations and plans are simply off the table
- You can and MUST save for your kids’ college.
In investor speak, that means sell when the fund is low, and buy some other hot fund when it’s high.
In case you aren’t aware, that will kill your chances at growth, just like any other mutual fund based approach. Considering that the variation of mutual fund performance has been really wide over the years makes it a real bet on whether or not mutual funds can beat their historical performances, let alone the potential inflation of costs of college.
There is a huge assumption that college is the best route to go, and it is best for everybody. That simply isn’t true. Some of the richest people out there never went to college. That doesn’t mean college is bad for you. It just means it isn’t the end-all/be-all of your career. I personally know people that went into home construction and made a fortune. Some of them weren’t good at storing the wealth they had built, and suffered tough times during 2001 and 2008 when home construction slacked off. There are many career paths that aren’t necessary found through college. It means that we need to keep this type of flexibility in mind. If you sink lots of money into a 529 plan and your child picks an alternate career path, what then?
- Invest in real estate
- Buy an EIUL
Unfortunately, if you own rental property and seek student aid, you will have to report it as part of the evaluation. But that’s okay. If rental property provides the means to make it happen, that’s okay.
I also have an EIUL that in 15 years, may be feasible to borrow from if needed. Then I can pay it back when the time is right using my rental property to support my own retirement plans. Did you know that built up cash value in any permanent life insurance is not considered when determining student aid? The money stocked away there is off the books and not even looked at.
Both of these options provide much more flexibility to supporting your children’s future plans. They also don’t pull you off the path of building your own retirement, one of the best gifts you can give your children. Since the history of real estate and permanent life insurance is much stronger and not as risky, then it would appear to have a lot more substance than that video I saw about this family’s plans.