Save for retirement, don't pay your kid's college tuition

Money magazine is reporting on a common problem faced by parents today: whether to save for retirement or to pay for college for their kids. As our culture increasingly values material goods more than ever before, "savings" is becoming scarce for many. And kids aren't immune from wanting name brand clothes, the latest gadgets, or any of a number of expensive hobbies. Those all eat into retirement savings and college savings, too.

Although some parents are saving for their kids' college educations, many are finding they're far away from what they'll really need to send their kids to school, especially if they have multiple children who are college-bound.

So what options are parents left with to finance college? Borrowing against home equity is one option that parents often turn to, yet most don't have homes worth enough to pay for the full college bill. And whatever they do borrow must be paid back, putting the long-term financial health of Mom and Dad in jeopardy.

Another option includes financial aid such as scholarships and grants. There's lots of help out there for students if they're just willing to spend the time seeking it and doing the paperwork. Taking money out of a retirement account and/or stopping retirement savings and directing that money toward college expenses are both viable options. But again, this puts the financial health of the parents in jeopardy.

I have a novel idea: Let the kids pay for college themselves. I hear your collective gasp. How dare I suggest such a horrible thing when your precious little children need to spend their time studying. Wake up call to parents: Students don't spend all that much time studying anyway!

The truth is that kids who pay for college on their own are almost always far more responsible with their educations. They're looking to finish school on schedule so they can get out there and earn a living. Those who have no vested interest in finishing school may be more likely to change majors a thousand times or otherwise delay graduation.

Ask any college kid which of their classmates are more committed to school – those paying for it or those who have been handed their education? I think you'll find that those who are paying really value the education much more and try to get more out of it. There are plenty of loan and scholarship programs that students can use to help pay for college.

And here's a newsflash: No one ever died from working while going to college. I did it, and everything worked out just fine. In fact, I worked quite a bit while in school, and it wasn't a hardship at all. It helped me appreciate real-world economics and to take my education seriously. So consider having your kid pay her or his own way. It will teach them lessons they'll never learn if college is handed to them on a silver platter.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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