Which Will Get a Bigger “Thank You”?

As you may have heard, college is expensive.  When my wife got pregnant with our third child, she mentioned how funny it was going to be to have “3 kids in college at the same time.”  That realization sent me to the fetal position to rock in place in our closet, as I tried to wrap my financial planning mind around that staggering cost.  

A couple years later, we were in Geneva NY and I saw the campus for Hobart & William Smith Colleges and looked up the approximate annual cost to attend.  Understanding there are other factors, and that the “price” to attend is often similar to looking at the sticker price of a car, I was still shocked to see $74,000/year.   As I worked through this number, I started to think about two different scenarios and which one, if played out, would get me (and of course my wife) a bigger “THANK YOU” from our children.  Here they are: 

Scenario 1 – We save our butts off and assuming the price is the same as it is today, we pay $74,000/year for four years of private education for a grand total of $296,000 (for just one child).  Graduation day comes, our oldest daughter is student loan free, and she turns to us as her graduation cap comes crashing back down to earth and says “Thank you Mom & Dad!”    

Scenario 2 – We save our butts off and assuming the price is the same as it is today, we let our oldest pay her own way and maybe she doesn’t go to a private school, maybe it’s a state school and we take our $296,000 and invest in a retirement account for her.  We tell her that she needs to pay for her education and make a living and be happy, but that she doesn’t have to worry about saving for retirement or her future.  Just get to 60 we tell her!  That $296,000 invested in US Stocks (assuming 10% growth, which may be a little high, but still the long-term average) grows into $11,071,685 over the next 38 years.  Actually, let’s back it up and tell her, “just get to 50!”  In that 28 year growth period, there is a pool of money now worth $4,268,614!  Assuming my wife and I are still alive at this point, our 50 year old daughter turns to us and says “THANK YOU Mom & Dad!” 

Even in a pandemic-fueled college landscape, college tuition costs still rose 1.1% for the 20/21 academic year.  Although I am a believer in a solid college education, as you gear up to make these mountain-sized financial decisions, it doesn’t hurt to consider the alternatives.  As for which will get the bigger thank you…let’s see if one of the three says thanks for the ice cream this weekend and then we can build from there 🙂 

Happy Friday! Please stay healthy and be safe!