What happens when college dreams meet financial reality?

Transcript:

Hey, humans. I’m Michael Liersch. This is the About Money podcast presented by Wells Fargo. I’m a behavioral scientist with a PhD in cognitive psychology who loves openly talking about money to help humans better understand their money behaviors.

In Season 4, we’re going to get real by sharing money situations and scenarios that happen all the time to millions of us. Real stories. Relatable and usable. We’ll also be sharing valuable life hacks you can use to stay on track, or get back on track, with your finances. So let’s get into it.

In this episode, we’re going to talk about what happens when my college or educational dreams, generally speaking, meet financial reality. Education, for many cultures, for many humans, for many families, it really is the number one priority.

They say, Michael, no one can ever take your education away from you. True story. Like, I totally agree. Trust me. You know, I grew up, you know, in very humble circumstances.

And I worked so hard with my mother to get to education that I had, you know, took out student loans, had scholarships, all that stuff. So, trust me, I get it. That said, when education risks your family’s money situation, that is something that you really should take a very close look at.

So, a couple of stories for you. I’ll never forget this. And this is years ago. I met with a client who had four children, sent them all to private schools K through 12, sent their kids to university or college, four-year colleges, and then had committed to them, because this was something they really believed in, that they would send them all to graduate school if they wanted to go.

And I’ll never forget them sitting there, and us going through the numbers. And they looked at me and they said, Michael, am I ever going to be able to retire?

And I had to be honest with them. And I said, I’m not sure. I’m not sure you are ever going to be able to retire if you want to continue this lifestyle. And they had to make some severe changes to their lifestyle because they felt like they had made that commitment.

I’m going to tell you, years later, their children were very frustrated with them because they had felt like their parents must have had those financial resources to give. And they hadn’t been told that, in fact, their parents were sacrificing their retirement readiness; they had no clue.

And the kids ultimately realized that they were probably going to have to take care of at least one of their parents at some point in the future.

Another story, you know, gets into this idea of when you make those commitments, when you have those dynamics, you have multiple family members who are educated. Is there a one size fits all answer for, you know, the family members who, you know, want to go to school or don’t want to go to school? What does that look like for them?

When you think about that idea, I have met many clients who became lawyers, doctors because of those family pressures and commitments rather than what they wanted to do. And many of them end up making career shifts after spending all that money and time on education. And I’m not saying it’s a waste. I’m just saying if the conversation had been had, perhaps other paths could have been taken.

You know, when you have family members who are taking out student loans in order to get educated, that’s something to consider too. Student loans can be extraordinarily burdensome to people who are out of school and trying to make their way.

So, let’s get to some life hacks for you to consider when it comes to matching your financial reality with your educational or your college dreams. The first hack that I want you to really think about is, are you even having a conversation about education as a priority in your family?

If you’re not, I really encourage you to. It’s not that difficult. Having family members who are being educated really understand how much it costs, the commitment it’s taking the family, the financial trade-offs you’re making.

It can create a new energy. So instead of you saying, well, you have to get good grades, it becomes more about, this is an investment we’re making in you. Are you taking the advantage of it that you should in order to make the most out of your life?

The second hack here is to really crunch the numbers. Again, it’s not that difficult. It may not be what you want to see, but it’s not that difficult to do. And it’s not just about the money spent on the financial institution. It’s really about all the costs surrounding it and the trade-offs you’re making.

When you’re getting those graduate school degrees, you’re actually not employed or having a job. So you’re actually, you need to count that too. You don’t have money coming in. Sure, there’s future potential benefit in terms of employment opportunity. But is that made up for for that four, five, six years, you’re in that graduate school education. Similarly, when you think of K through 12 education or college education, what are more public school options?

What are options that can take it down from tens and tens of thousands of dollars to maybe 10 or $20,000 per year?

And when you actually crunch those numbers and you look at all the different trade-offs you could make. You know, perhaps it’s public school for K through 12 and then a private school for college. Perhaps it’s public school all the way through. And then the child chooses whether they pay for their PhD or their JD or their MBA.

The last hack that I would highlight when it comes to education is really make it purposeful. You know, why is education important in your family? Why? And the answer that no one can ever take it away, that’s not really a why; that’s just a truth. So, the idea here is why would you get educated in a particular thing?

So, think about it this way. Let’s say someone wants to become a veterinarian. There’s very specific educational tracks and goals one should take to do that. So, again, start getting specific. If someone wants to become a medical doctor, again, that’s actually a very broad category. What kind of medical doctor is it? A surgeon? Is a general practitioner? If someone wants to become an attorney, what type of attorney?

And are you being very purposeful and intentional about the way you’re spending your money to get that human being to where they need to go?

And my guess is that perhaps we’re not all as intentional as we should be when it comes to these dynamics. And since it does matter financially speaking, if you’re the one providing it or you’re the one receiving it, there is some severe expectations when people are making those trade-offs. Would you make the same trade-offs if you were being super intentional?

So, ask yourself, if you’re on the giving end, are the sacrifices you’re making commensurate with the benefit? And if you’re on the receiving end, is that commitment really something you want to make and that you’re passionate about? And ultimately, if you’re responsible then for taking care of that person, financially speaking, who is giving you that money to get educated now, is that the right trade-off you’d want to make? Have those discussions today.

That’s it for this episode. If you really like the episode, please share it with your family and friends. The About Money podcast is produced by Wells Fargo.

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