Thursday, December 27, 2018

Instead of Paying for Your Child's College, Get Them This!

Many financially savvy parents know that by paying for their child's college education they will be giving their offspring a huge leg up on their future.  Without crippling college debt, their kid(s) will be able to possibly afford a home, get married, and start a family.  The incentive to bust your butt to save for your child's college expenses is there, and the only thing keeping most people from doing more of it is the need to also save for retirement.

Image result for rental property

But let's put the retirement problem aside.  Let's pretend you don't have this problem and can indeed save for your child's college expenses without sacrificing retirement savings.  I'm here to tell you that even though you may be doing a noble, caring, parenting act, it's now a wrong financial move.  Saving for your child's college education is a losing endeavor.  Here are three reasons why:

1) A moving target.  College expenses go up every year.  You'll never save enough.  You better be wealthy!  

2)  Your child will want to go to grad school.  Many students need advanced degrees (Masters or Ph.D's) to compete in their field with the thousands of other kids out there trying to do the same thing.  This means that your child will need more of your money, OR they will use student loans to pay for their grad school education, getting in debt anyways.

3)  Your child will major in something that isn't easily employable.  Sure, they won't have any college debt, but they'll have a low-paying job, nothing to do with their major/degree.

The Traditional Path Leads to Financial Struggle

When your child leaves college, in debt or not, they'll start buying liabilities.  The first liability they'll own is their car.  But they won't stop there.  They'll get a pet, dog or cat.  Then they'll want to buy a house with their partner.  Their starter home will become their biggest liability, draining them of cash every month.  Yes, your home is not an asset!  In effect, your kid will end up in the rat race...all because they don't own any most Americans.

What should they do?

They should start out at a Junior college.  Have a part-time job while attending and live at home.  They should take public transportation if you can't pay for their car insurance, gas, and maintenance.  After they get their A.A. degree or skills certificate, they should take a year off from school...but not to slack off!!

Instead they need to double time their work load.  Two part-time jobs or one full-time job if they got a skill.  Live with parents.  Save as much money as possible.  Then they can go back and finish their degree.  They may have to take out some college loans but it won't be as bad since they completed two years at a community college and they saved a bunch of money during that year off to pay for their university expenses, i.e., to complete their degree.

What should you do?

Use the money you saved for your child's college education to buy your child their very first asset!  Buy them an out-of-state (or in state if you live in an affordable area) rental property and put it in their name.  Make sure it is set-up so your son/daughter understands their role in making it provide positive cashflow in their real estate bank account every month.  Your child can claim the property as an investment, rental, on their tax return and after a couple of years, have a track record as an investor for future banking purposes!  

Imagine your child having income coming in from their salary job, AND from a rental property each month.  That's a great start to a life of accumulating wealth.

If all of this doesn't make any sense, watch the video below:

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