Q&A - Investing & Paying For College

The decision to invest in a college education carries more weight today than ever before. 

With escalating costs and evolving job markets, the question isn't just about getting a degree; it's about making smart financial choices for the future. 

In this episode, I tackle the critical aspects of investing in education and the nuances of funding college. It's a deep dive into balancing the scales of knowledge acquisition and savvy financial planning.

I also explore various financial vehicles like UTMA, UGMA accounts, 529 accounts, Roth IRAs, and others, dissecting their advantages and potential pitfalls. It's not just about choosing the right account; it's about understanding how these decisions ripple through your financial life.

So make sure to catch this episode – it's packed with insights that could be vital in securing a stronger financial future for you and your family. 

IN TODAY’S EPISODE, I DISCUSS: 

• Tax implications and benefits of UTMA/UGMA accounts versus 529 and Roth IRAs
• Strategies for paying for college without jeopardizing your retirement
• The true cost of student loans and how to guide your kids towards financial savviness

RECOMMENDED EPISODES FOR YOU 
If you liked this episode, you'll love these ones:

• Which is Better High Yield Savings Accounts or CDs?
• How to Do Money Right As a Family
• Build Wealth & Live a Rich Life at Any Age (My son's journey)
• Wealth By The Decade - Roaring 20s

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Transcript

1:56

Does it make sense to go to. College in today's times? Well, I don't know. There may be some different answers about that. But here's what we do know. When you take in consideration the interest cost, the lost income, the time, and actually the costs of education, it could cost you more than a half a million dollars when it's all said and done. Now, I'm not saying not to go to college. I actually believe even cods. We'll talk about that in this episode. But what I do want to do. Is answer a question that came in. From one of you, one of the community, Dan, asking about college education, paying for college, and how to teach your. Children, teach your teens about investing, about money, and about being responsible. In this episode, the affluent entrepreneurship. I'm actually going to go deeper. We're going to talk about the different. Accounts that you might be able to. Use to pay for college. UtmA, UGMA accounts, 529 accounts, Roth Iras, custodial. Ross. We're going to talk about all the. Different accounts, the nuances of it, the. Pros and cons of each of them. So you have what you need to. Make the right decisions around your kids, around your teens, around the accounts you want to invest in and how to. Use it to move them forward. All right, welcome to this episode of. The affluent entrepreneur show. This one, it's going to be a good one. Let's do this thing. This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an affluent entrepreneur. All right, welcome to this episode of the affluent entrepreneur show. This one, we're going to talk about college. We're going to talk about education. We're going to talk about, oh, my. God, how much it costs, and we're. Going to talk about how to stay out of trouble. And here's why I think it's important. Listen, I just read a story, and. There'S plenty of these stories out there. Here's a guy who was 59 years old. He had student loans of $79,000,$79,000. And yet here he is at 59. Years old and he owes 236,000. He borrowed 79 he owes 236. And here's the kicker. He'd paid 190,000 in payments. What happened? Well, the power of compounding, working against you, stalling out payments, all kinds of. Things can work against you. And if we're not careful, as we start to go down this pathway to paying for education and understanding how this. Can play out long term, we could. Find ourselves in the same type of situation. There are story after story after story. Of these things, and unfortunately, I'm not. Going to get political here, but unfortunately, I think part of the blame is on the financial aid offices because they're putting pens in hands of youth that don't have an understanding of what they're signing up for and what the long term impact of what it is. We'll talk about how to do this responsibly. We'll talk about the options, talk about what it is to get college paid for. This whole episode is a result of. One of you, of the community reaching. Out to me and sending me a. Note saying, hey, I've got a question. Let's just look at Dan's question here. Dan says, hey, Mel, I really enjoyed this video. I'm curious as to your thoughts regarding. The pros and cons of opening a UGMA account or a UTMA account, a uniform gift to miners act account or a uniform transfer to miners act account custodial account. I was thinking it may be a. Good way to teach our 14 year. Old how to invest. And I'm also curious as to how this impacts when applying for scholarships, grants, and when it comes time for college. This is such a good question. And rather than just focus on the UGMA and the UTMA accounts, what I really want to do is I want. To break down the idea of funding. College, and I want to break down a multitude of accounts that you can use and how you might be able to look at it. Because whether you're a parent, whether you're. A grandparent, whether you're an aunt, you're an uncle, you might want to help someone go to college. Now, let me be clear as I start this journey. I still believe in the college experience. But what I also understand is what is college about? College isn't necessarily an education process that. Sets you up for life. I actually think that your education is lifelong. If you believe that you go to school, you get a degree, and then. You'Re done learning, then that's a myth. Because the true growth is not in the academics you learn, but is in. The application in real life. And that only comes from living, that comes from running the laps, that comes from doing the things that actually will make a difference. Now, why I believe in the college experience is that it is also a. Way for our youth to start something big and finish it. There's going to be trials. There's going to be tribulations. There's going to be teachers you don't like. There's going to be classes that you can't get. There's going to be things that you have to navigate. And I think that that's valuable experience, aside from the socialization skills and those kinds of things. So I truly believe in college as. A vehicle to teach certain things. But I also believe that college is about a degree process and not a lifetime education process, because your education, your. Learning, your growth never ends. And so with that, let's just talk about the college experience itself. What do we think is going to happen and how does this really play out? Because I think that when you look. At it, you start to say, hey. There'S some things going on here that. We need to think about. And the first is this average cost of college, including housing right now, is around$36,000 a year. $36,000 a year. Listen, do you know that when I came out of college and I had already passed the CPA exam, I was only making $27,000 a year? You'll see what the cost of college was when I went. All right, that just may be a demonstration of how much college costs have gone up or how freaking old I am. All right, so the average cost of college right now is $36,000. The average in state tuition is$9,600. $10,000 out of state is 27,000. Then you look at the private tuition is 39,000 almost. And that's just tuition and fees. When we look at student loan interest. And the loss of income, and what. I mean loss of income is the earning years while you're in college. You could exceed over half a million dollars when it's all said and done. Heck, if you're spending $40,000 a year just in tuition and fees at a private school, you're at$160,000. Just for four years, you could be$200,000 if it takes you five years. Then add room, board, all of that, it starts to add up. It starts to become a lot. Then you sit back and say, well. The average interest that is paid on a student loan is over$2,000. And the average student loan isn't paid off for 20 years, two decades. But yet there's people out there that. Have had it for a long time. This person that's 59 years old, you look at the fact that student loans. Are close to$1.8 trillion. I got to tell you. Let me stop here for a second. Because this is a travesty in our country. This is a problem in our country. Now, part of the problem is, look, you're signing on the dotted line. You are making a commitment. You are signing a contract. You can sign on the dotted line. And hope for forgiveness down the road or a cancellation. That is not a strategy. When you sign on a dotted line. You made a commitment. If you're not prepared to pay the. Full vote to pay the full bill. Don'T sign on the dotted line. That's one side of it. The other side of it is, I think that the financial aid offices have done a horrible job of explaining the. Commitment that is being made and the financial obligation that is being made by a kid who is 18, maybe 19 years old signing on the dotted line for a loan. And they're saying, don't worry about it. You'll worry about it when you graduate. In the meantime, this thing is growing into an albatross. In the meantime, it's going to mushroom. And now when you get a chance to get to the end of your. College career and you're set to graduate. And they're going to celebrate you, and they go. Go out there and soar. Soar to your greatness. Oh, before you go, let's strap the. Albatross around your neck. It's called student loan debt. Now, you got to start paying it, and it drags you back down. This is the thing that I think. Is a problem, and we'll talk about. Where student loans fit in, how to do student loans properly. But I think that we need to understand that it's not free money. The bill is going to come due at some point, and we're sitting on $1.8 trillion right now in student loans that are outstanding. We had a pause in the payments. That pause is gone. Payments are coming due. I just did a live talking about the fact that we got over $1 trillion in credit card balances these days, plus the student loans. It's crazy the kind of debt that's going on, and we need to be careful about it moving forward. Most graduates are graduating with almost $40,000. In student loan debt, and parent plus loans are almost $30,000. Now, hear me clearly. Parents out there, no. Parent plus loans, absolutely zero. You never take it out. You never sign for it. You never do it, ever. Here's why you are co signing the loan. You are 100% responsible for the loan. That means that if by chance, your kid cannot pay the loan, does not pay the loan, for whatever reason, doesn't. Finish college, they're coming after you. I don't ever want your financial future in jeopardy because of the choices that were made. You were trying to make sure that they got a college education. You were trying to do this, and you thought it was the right thing to do. A parent plus loan. I just think they're horrible loans, and. I would never do it. Okay. Then you look at it and say. Okay, we've had 11.1% default rate prior. To the pandemic, and that rate is going up now, because now the pause is gone. Okay? 17% use credit cards or home equity to pay for college. You look at it and go, wait a second. And 5% are using the retirement accounts. Parents, listen, this is really important. When we talk about the wealth priority. Ladder. The paying for your kids college. Is optional, and it is after you. Take care of your financial future, and. You might sit back and go, I don't agree with you, Mel. It's my responsibility to pay for their college. And maybe that's your perspective, but it's. Also your responsibility to take care of yourself. When you're old and gray in your. Financial years, one of the greatest gifts you can give your children is to not knock on their door and say, I can't pay my bills. Can I sleep on your couch? Or, I have medical bills, and I got to go into a care facility, and I can't pay for it. Can you pay for it? To become a burden on your children, one of the best things you can do is never have that happen. And one of the problems is that if we're not careful, it can happen. Here's what I mean by this. I'm not saying not to pay for your kids schooling. I paid for my son's schooling, okay? But to be responsible and engage them in the process. Here's how I look at it. Your financial future is coming, no matter what. At some point, you're going to decide. I don't want to work anymore. At some point, you're going to decide you want to enjoy those later years of life, okay? Now, if you follow me and the wealth priority ladder and all of the affluent entrepreneur, the affluence blueprint principles, what you are going to do is build a money machine that's going to give you the capacity to do all those things by choice. But what happens is if we don't follow the wealth priority ladder and know that we're funding our financial future before we fund their college, what ends up happening is we put in jeopardy your financial future. So what I want to know is that. Your funding, you don't have to be financially free. You just need to be fully funding it so you will get to that point and then that excess can go towards their college. Because here's what we know about their college. One, we don't know if they're going to college. Two, we don't know if they're going to complete college. Okay? So there's uncertainty in those college elements. And three, they can be involved in the process. If they want to go to a specific college, get them involved in the process. There are scholarships that they can qualify for, athletic and academic. They need to be involved. They don't get to sit back and let mommy and daddy pay for it. They're going to earn it. They get involved and they're going to appreciate it more. So they can get grants, they can get scholarships, they can do those kinds of things. Now, the other thing that, and this is hard sometimes they're going to college. For a college experience and an education, a degree process. They're not going there because, oh, I love the mascot. You're not going into debt with a parent plus loan or student loan debts or any of that stuff or using up your retirement account or your equity in your home so they can love on a mascot. They're not going there for a party school. They're going there for a purpose. And so we give them a chance to go, but they get involved in the process. Now, at the same time, they have the ability to do some things differently. They can make sure they're getting good grades, apply for grants, do those kinds of things. We'll talk about some rules of education at the end. But I just wanted to kind of set my perspective, and I know that this may not be a common opinion, and I know that it may not be a favorite opinion because parents really want to take care of their kids. I did, too. Okay. But I think we need to be. Responsible and think long term in the process and really make that work. So let's talk about the accounts, how these accounts come into play, and then we can turn around and look more clearly at what to do with education. But I also want you to get a perspective of what has transpired with college costs over time. Because I think that when you see. This, it's mind boggling. So this contributes to the problem. This is a graph that we created, the historic cost of college. The blue is public four year college. The green is private four year college. I will tell you that I was in college right in this zone here. So my college costs, and I was in a state school. So it was about that $4,000. But look what happened. That $4,000 to go to the same school right now is 22,000. It's gone up 500%. 500%? That's crazy. Okay. When you look at it, the private schools, same thing. It's from 10,000 to almost 48,005 times. Again, the cost of college has gone way up. We have to be smart about it. Now, you can see that they're starting to taper off, and so hopefully, the. Cost of college starts to come back down. I believe this is personal opinion. I believe the free loaning of money. During the student loan programs, putting this. $1.8 trillion out there in debt, is what contributed to the increasing cost of college, because it was like free money. And so they kept just saying, don't worry about the price. We'll get you a loan. Don't worry about the price. We'll get you a loan. Now, this is my speculation. This is my perspective. I may be off. So from here on out, I want. To give you the responsible way, the way to do this so you don't. Bury your kid in debt, and you. Don'T bury yourself in debt, and you don't burn your retirement and your financial freedom. All right, so let's jump to some accounts. Let's talk about the various accounts and start with that. All right, so here's the deal. Let's just talk about the UTMA accounts and the UGMA accounts. They're similar but slightly different. UTMA stands for a uniform transfer to. Miners act, and UGMA is uniform gift to miners act. I'm going to talk about each of these accounts that you have opportunity to use at a variety of different levels. Okay? The first is the tax benefits. When you put money into an account for an upma or a UgmA, there's no tax benefits. You get no tax deduction for putting money in. Okay? There's no deferred growth. It is just like a regular post tax account you're putting money in. And if it's invested in anything, there will be income that needs to be taken in consideration, and that will be subject to kitty tax. What happens is that in an effort to avoid the people putting money into an account. And transferring income to a child. So what they're trying to avoid is, let's put a lot of money in the kid's name, and therefore I don't. Have to pay tax on that money. Because now it's in the kid's name. The IRS said, wait a second. Congress said, wait a second. We're going to allow you to do. That to a point. We're not going to allow you to do that forever. And so they created this thing called kitty tax that allows you to do that. I'm actually going to try to walk. You through what this looks like because I think it's important to understand how this can play out. So what ends up happening is that your kid can earn on investments and. That kind of thing. The first$1,250.$1,250 is tax free, or I should say at 0%. Okay, then. So they can earn up to one $250, but they can't earn unlimited. The second 1250 that is earned is at typically about 10% kids rate. Okay, so that gets you$2,500. Anything over $2,500 is taxed at the parents rate. So the only savings you have is going to be on that first $2,500, which is fine. Just know that you're not avoiding paying. Tax, you're not transferring taxable income to your kid and saying, who? I can just transfer tons and tons of money into their name and then they pay the tax at the lower rate. No, it's going to be subject to the parents rate under the kitty tax rules that are there. So going back to the ATMA accounts. This next element becomes really important, and. I want you to listen carefully on this. Who owns the account? Who controls the account? Okay. Before the child is of majority age. The funder is in control of the account to an extent after the majority age. And the majority age is anywhere from depending on state, usually 18 to 21, but it's state specific. The beneficiary of the account has 100% control and ownership of the account. In other words, when you make a contribution to one of these types of. Accounts, you lose control. Yes, you have control of the account while they're a minority, minority age, but. You don't have control to take the money out, use it for what you want. It is theirs as soon as you transfer it in. And you are only custodian it until they become a majority age. That means that you can control it. Up until that age. Then they get 100% control. Now, here's the deal. If you put money in and it's meant for college. And say you put, over time, you put 50,000,$60,000 into one of these accounts, and they become 18 years old. They have full control of the 60,000. And if they want to go and buy a car with it, they want. To go and travel Europe with it. You can't do a thing with it. You can't do a thing about it. It is their money to do what. They want, when they want. So it doesn't have to be used for education, even though that's what you put it in there for. So the challenge with UTMA and UGMA accounts is you lose 100% control. And especially when they get the money at majority, they can do whatever they please with it. And all that work that you did may not go towards the end and the goal that you had in place. Okay, so that's huge. The other thing is, are there contribution limits? Some of these accounts have contribution limits, and in this case, there are no contribution limits. You can put as much in there as you want. However, you could be triggering a gift tax when you do this. You have the ability to. In current, current terms, you can gift to a child. Each person can gift to a child. Up to$17,000 a year with no gift tax. Anything above that can be subject to. Either using your lifetime exemption or subject to gift tax. So there are no contribution limits, but you may trigger gift tax filings and. Gift tax elements if you're not careful. Now, how does it impact the FAFSA. Form, the financial aid form, when they're applying to college, it's going to be given a 20% weight because they see this account as owned by the child. You'll see how other accounts aren't triggered at that heavy of a weight. It's going to have a bigger impact on the FAFSA form for financial aid, for grants, for scholarships, all those types of financial aid form elements, because this is seen as if it was owned by them. And assets that can go towards paying. Education and then investments. You can put in a variety of investments. The UTMA account has a wide range of investments that you could put in, more so than the UGMA account. UGMA account is more retirement type assets, only etfs, index funds, and that kind of thing. So you have a lot of flexibility with these accounts on the investment side. But you don't have flexibility on the control side and making sure that it's used for the purposes that you intended it for. Is it transferable? And the answer is no. Once you put it in. It is absolutely irrevocable, and it is done. All right. I didn't use any of these accounts for Jeremy. The kitty tax really didn't save that much. It wasn't that big of a deal. So I just said, I'll pay the tax. I put a joint account in with him and I on there, but it wasn't a UGMA or UTMA account. I had 100% control. I could change it, I could revoke it, I could do whatever. But it gave me the flexibility to. Make sure that I'm using the accounts. In a way that developed him with a financial acumen, a financial smarts to have conversations to create and know that he's living into the values that I want to make that happen. Okay, so those are the first two accounts. And I know, Dan, these are the things that you asked about. But let's look at some other accounts that might play into paying for education or things that we might be able to look at. And then the next one really is this idea of a 529 plan. Now, 529 plans are a different kind of account. They are specific for education. Okay. So these were put in place to. Fund education, and it allows you the. Opportunity to allow it to grow and. Take the money out for qualified education tax free. Okay. So as we look at these accounts, let's look at some of the nuances there. Are there tax benefits? Yes, there's potential growth. There is some tax deductions, depending on the states, that's possible. You get tax free growth inside the account. And if you pull the money out for qualified education expenses, then you don't pay tax on it. So they're really good accounts for education. If you want to do that, you have more flexibility in it. And under the new rules, you now have the ability to use these accounts for k through twelve also. It used to be you couldn't do that. So you can use it through k. Through twelve in doing that. Now, what's the control and the ownership of the account? The funder controls the account. The funder owns the account before majority and at majority. So no matter what age of the kid is, the funder has control and say the account. Now you're going to create a beneficiary of the account, and that would be your kid or your grandchild. But you can change the beneficiary. It's not locked in, it's not irrevocable like the UTMA or the UGMA account. You can use it for education, but. If you take it out for anything. Else you're going to get hit with penalty and tax. But you can take it out for. Qualified education expenses and not pay any penalty tax. Is there contribution limits? No, but you still have the potential gift tax issues that we talked about previously. Now, here's the other good thing about the 529 plan. Because the child does not own the. Account, its credit on an impact on. The FAFSA form is far less. It's 5.64% instead of 20%. It's one quarter about of the impact. So it is much less of an. Impact on grants and financial aid elements going into school. Now, investment options, they're going to be. Limited because a lot of these plans. Are driven by state, and it's like your 401k. Here's your investment options, and they're limited investment options. So you're going to want to look at the plan by state. You're going to want to look at. Their investment options to see what makes. Sense and if it's got good investment options and low cost, low fees to make it happen. Is it transferable? The account isn't transferable, but your ability. To change the beneficiary is. Here's why this becomes important. Let's say that you put$50,000 into a 529 plan for one child. The child goes to its state school, only costs$30,000. There's $20,000 left. You've paid for it out of the 529 tax free. There's$20,000 left in the account. But this child is out of school. But there's another child or a grandchild that's going to go to school, you just change the beneficiary. Now that 20,000 can go to another beneficiary, so you can change the beneficiaries down the road as needed to make that happen. And so you have a bit more. Flexibility with the 529 plan. But one of the things, again, I. Go back to is if we start. These really early, which is great, we. Don'T know if the child is going. To go to college, and now we have this money locked in or we. Pay tax and penalty if we're not careful. Now, if one child doesn't go to. College but another does or grandchildren do, you just change the beneficiaries so you could potentially use it at some point in time and you don't necessarily lose it, but just know that you don't want to overfund these if we don't know whether the child's going to school or not, and so we want to be mindful of how we use these. 529 plans, that leads me to these. Last two accounts that you can use. And the first is a Roth account. So let's just look at this. And this is a traditional Roth. Now, the only way that this child can use a Roth account is if they have earned income. To qualify, to put money into a Roth account, you must have earned income. Otherwise you can't do it. So they've got to be getting w two 1099. They've got to be able to prove. That they have earned income to make that happen. So assuming that they have earned income, they're doing a part time job, or they're making money, they're reporting the money and all that stuff, then they have the opportunity to use a Roth account. Now, are there tax benefits with a Roth account? Absolutely there is. Is there a tax deduction? No. However, you get 100% tax free growth forever. So all the money goes into a Roth. You don't get a tax deduction up front. It gets invested, it grows tax free. And when you take the money out. At 59 and a half, it's completely. Tax free, including the growth. Now you're sitting back saying, well, no, I'm probably going to college. They're going to college before 59 and a half. How do I get access to the money for them to use for college? Then? With a Roth, you have access to. The contributions you put in at any time. So if you actually funded it and you put in right now, you can put in 6500 a year in there, say you funded it for two years, you got $13,000 in there, you can pull the 13,000 out tax free. It's just the growth on the 13 that you can't. Okay. Without penalties. So you have the opportunity to do that. Now, Roth before and after majority is. Owned by the funder, which is typically. Going to be the child. Is there a limitation on what you can use it for? No, but there is a limitation on how much and when you can pull it out. Because of the tax benefits that are. Given to that account. There are contribution limits, like I said, currently it's at $6,500. If you're 50 and over, you can. Put$7,500 a year. And if you make too much money. Which I don't think a college kid is going to have that issue. If you have income limits, you may not be qualified to do Roth. Okay? So you've got to check the income limits. If you make too much money, then you can't do a Roth account. Okay. And we're talking about six figures in. There to really start to drive some of this. But look at the earned income limits. Now, how does it impact the FAFSA? It is counted in income. If you're pulling money out of a Roth account to pay for college, they're going to count it as part of the income streams for the FAFSA report. So if you're using a Roth, my. Suggestion is you don't start pulling that out until they're looking at an average of the last 36 months or so. So you want to leave that alone and not get it pulled into that. Average as long as possible. Investment options. There's a wide variety of investment options. Because it's a Roth account, we have the access to a population of investments. That we could do. Can you change the beneficiary, or is it transferable? Yes, it's transferable because you can change the beneficiary, but it's not really transferable. In other words, I can't make my Roth your Roth. All I could do is change and put you as a beneficiary. But I still own it. It's still my Roth. Okay, I can change the beneficiary on the Roth. Now, there's a second kind of Roth that plays into this, and this is. What we call a custodial Roth. Now, the custodial Roth has effectively the same benefits. The difference is that the person that is the funder of it is a. Minor, and therefore, it needs to be. A custodial account with a parent on it. To do that. They're both set up the same. They both have the same income limits. They both require earned income. They both are counted in income with the FAFSA. They both have a wide range of investments, and you have the ability to change the beneficiaries. So they're all the same. The only difference is that the parent is on the account, because it has to be a custodial account, because they're. A minor to begin with. And so these are the five accounts that I think you can use to. Really look at where can we put. Money away for future college expenses? And this also allows you to start to have the financial conversations with your. Kids, to start development. Now, I think you should be having financial conversations with your kids way earlier, like 910 years old, if not sooner, where we start to create values through how money is used, to understand generosity, to understand the value of it, to understand what it really is in our life, that it isn't the purpose, it might be a result, but it isn't the purpose and all those things that you can make happen. So what are the rules for education? How do you get this right? I think there's a few things to really consider as we move forward. And as I close this episode out, the rules look like this. First things first, enroll your child in the process. They don't get to sit back and let mommy and daddy or grandma and. Grandpa or aunt and uncle set up their whole college. They need to be involved in the process. Think about this. As they move from their high school years to their college years, they are transitioning into adulthood. They're transitioning into making life decisions. They're transitioning into responsibility. They're transitioning into a place where they. Need to be more actively engaged in choices in their life. This is a great place to start. Enroll them in the process. Get them to understand what college is. About, why they need to go to. College, what their role is in it, how they can help get in college. If they really want to go to a specific school, and it's an expensive school, they need to do their share, their part. I remember with Jeremy, I said, you get in the school, you do these things, I will do my thing, and. Between the two of us, we will. Meet in the middle and we'll get you there. And so it's important for us to enroll them in the process. Whether it's grants, whether it's scholarships, whether it's academics, all those things, work, service, all those kinds of things. So enroll them in the process is rule number 1. Second is to be realistic, y'all. When Jeremy wanted to go to school. Initially, he was going to be a filmmaker, and he wanted to go to. A private college that did a lot. In the film industry. That was going to cost me. It was going to cost $250,000 a year. Now, I said to him, I'm going. To enroll you in the process. Grants, scholarships, and certain benefits. You get into the school, you get. These things in place, I will pay the rest. Now, good news is he decided to be an entrepreneur. So we didn't go to the film school. We went to a different school and didn't have to do that and everything. But be realistic. If the college is beyond your means, we don't get loans to make it happen. We don't go crazy with student loans. Say, don't worry about it. We'll pay for, we don't mortgage the house, we don't take out a retirement. Be realistic. And if they need to, they're going to need to use a bridge school to make it happen. We want to be realistic. The next thing is this, take care. Of your certainty before their uncertainty. Remember what I said, kids, they may or may not go to school. They may or may not finish college. So what we don't want to do is take the certainty of our financial. Future, our financial retirement. We know that's coming and replace it. With the uncertainty of what's going to happen in the college. Because here's the thing. When it comes to their college and. Paying for college, there are options. There are grants, there are scholarships, their ability to work. There might be some student loans. If we do it properly, they have options. When it comes to your retirement and. Your ability to pay your bills and take care of yourself in your later years, what are your options? Government support? Your child's couch? Those aren't good options. So let's take care of your certainty before their uncertainty first. Okay? Then we can move on. Now, the fourth is this. Grants and scholarships are the first dollars. They need to work towards that. They need to look at what does. It take to get that in place. There are so many grants and scholarships that you can apply for. And if they start early and we start having these conversations, one, you're going. To develop them as resourceful, responsible youth that can make things happen and take. Responsibility for their future. I think it's a win win that way. Then they might have to use a stepping stone school. Push comes to shove, if the school. Is too expensive, they're going to need to go to a community college. They're going to need to go to a stepping stone school to then move into that, reduce the costs of overall. College and increase the probability to get. Other benefits because you did a stepping. Stone school to get into it. Number six is when you start to. Look at student loans. I don't like student loans at all, but if you're going to get student. Loans, you never take more than one. To one and a half years your starting salary. I have a cousin and we were. At dinner one time and he was complaining. Complaining. He just graduated with an advanced degree. I don't know if it was master's or phd, but it was an advanced. Degree that cost hundreds of thousands of dollars in art history. So he spent and he got loans of over well into the six figures to get an art history degree where he is working in a museum for $27,000 a year. And he's complaining. He's complaining, saying, that's not fair, that's not fair, that's not fair. Wait a second. You knew going in the job that you could get is $27,000 worth of a job. You have no business taking on$150,000 in student loan debt with a$20,000 job. This is why I say you max out your loans at one to one and a half times your starting salary so you don't have the albatross around your neck. Your investment in college is just like any investment. You have to look at the ROI. You have to look at the investment. In college and the debt through the. Eyes of the income it's going to generate. And if the investment in college is 200,000, 150,000 and the income it generates is 20,000, not a good ROI. It's not going to give you the possibility for growth. It's not going to give you the possibility. It's how this 59 year old ended up with a$79,000 loan going up to 236,000 after paying 190,000. We need to be smart about the student loans, and the way we do that is we limit what we're willing. To take one year to 18 months max starting salary. Now, I know that that's hardcore, but my job on this show is to. Try and light the path to financial. Freedom, to take away the boulders, take. Away the potholes, to show you the pitfalls that people have fallen into. We live in a world where we. Got $1.8 trillion in student debt and we have kids out there and we. Have adults out there still struggling to pay their student loans back. I don't want that for you. I don't want that for your children. I want a life of freedom. Now, that might mean that there's some discipline and behavior changes and habits and decisions that need to be made earlier. That's okay, because the gift is on. The other side of that, the gift of freedom. The gift of choice. The gift of you being able to make the decisions, to live a life that you get to live by choice. Instead of a life, you have to live by need. That's the beauty of doing this. So, Dan, I hope that you listen to this. I hope you look at the different accounts and you start to look at it and start to have the conversations with your children early about, hey, college education. Here's what it's for. It's a great thing. Here's how we're going to do it. Here's how you're going to be involved. Here's how you're going to be engaged. If you want this school, that's fine. I will support it. But the only way we get there is if you do this, I do. That, that we play the game together, that we don't just hand it to them. And we certainly aren't going to pay for a college just because they like the mascot. All right. I hope that this helps. I hope that this shines a light. I hope that this gives you a perspective to look at college differently, to know that there's a huge value in the education. There's a huge value in college and the college process. But what that value is, is dependent upon what you're doing with it. It's a degree process. It's not a lifetime education process. Lifetime education is just that. It is lifetime. You will continue to learn. And in fact, I think you're learning deeper, more important things once you finish the degree process. But when you get in it, let's. Get in it in a way that doesn't bury us. All right? So I hope that this serves you. I hope that this helps. If you have questions, if things come. Up, do me a favor, reach out. You can send me your questions just like Dan did. You can go to askmelnow.com. We'll bring it on a show. I'll do a live. We'll make sure that we try to get your questions answered. I'm not here to sell you investments. I'm not here to sell you insurance. I'm not here to sell you on anything but the possibility of your dreams. Financial freedom is your birthright. I want to help you claim it. All right? Until I get a chance to see you in another episode or on the. Road as I'm speaking, okay? Or here online. Always, always strive live a life that outlives you. Cheers. Thank you for listening to the affluent entrepreneur show. With me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur facebook group now by going to melabraham.com/group, and I'll see you there.