Bonus: Skin in the Game Without Student Loans

 Kids need skin in the game, but student loans are not the only way to create responsibility. In this bonus episode, Laura responds to her interview with Brian Eyster with what she agreed with, where she disagreed, and how parents can prepare their kids for college without sacrificing retirement or creating decades of debt. 

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Transcript

Laura 0:00

After my conversation with Brian Ister, I wanted to share what I strongly agreed with, where our philosophies differ, and what I believe parents should do instead You are listening to the Money and Legacy Podcast with Laura Sexton. I'm helping families pay off debt, grow wealth, and build a legacy without sacrificing what matters most. This is where money feels easy. Hey, legacy builders. I wanted to give you this brief episode where I can talk a little bit about some of the things that we talked about We can talk about some of the things that may have sounded a little uneasy in my episode that I did on Tuesday with Brian Eister. Now, I really loved a lot of things that Brian said. There were some things he got absolutely right, but there were some things that I was just like, "Nope, hard pass. Don't wanna do that." And I wanna tell you about those here So we'll start off with what Brian got absolutely right. First of all, parents need to take care of their own financial foundation first. You as a parent need to make sure that you are on solid footing, because if you don't, you are putting your kids at risk. When they're little, little, little, you wanna make sure that you're taking care of your own financial foundation because they're going to follow along your habits, or they're gonna completely reject your habits. So if you have terrible habits and they grow up and they're like, "I don't wanna be like that," then you're going to feel bad about having not set them up correctly. Or if you have great financial habits, they're gonna follow along and go, "I wanna be like mom and dad. I'm gonna follow what they said to do." However, if you're coming to this and you're getting close to college and you're like, "Oh, well, I can put off paying, saving for my retirement to make sure that I'm paying for the kids' college," you're putting them at risk because you are not taking care of yourself and your future self. If your future self is broke, who are you going to rely on? Your kids are going to think that they are responsible for you, and you don't want that to be a situation. You should not sacrifice your retirement to pay for your child's college. The goal is not only to prevent your child from having to pay for college, it's also to prevent them from having to pay for your retirement someday. Okay, thing number two that I absolutely loved that Brian talked about is that you need to help your children discover how they are built. I firmly believe that the student loan crisis in America today, part of that, 50% of it, is a parenting problem. We as parents don't either know what the ramifications are of taking these loans are, or we don't guide our children to make good decisions on which college to go to, or we don't guide our children onto what careers to fall into. We don't need to tell our children to follow our passions. Our passions change. Feelings lie all the time. What you need to do instead is help them identify their strengths, abilities, interests, and the kind of work that they may be suited for. Give them opportunities to explore careers before committing to an expensive school or, or degree. I can't say that enough. Get them involved in something like scouting where they can Try different business ventures, try entrepreneurship. They can get their hands on STEM activities. They can get out with horses. They can work on multiple different things. Get them involved in things that are going to get their creative juices flowing. Allow them to try things on a very simple level, and if they take to them, let them go at them full force. Talk with your children early and often about college, careers, costs, and what your family can realistically afford. If you wait until senior year to talk to your children about college, you have done them a grave disservice. By senior year, they already think in their head they know where they're gonna go to school, and you are holding them back. That's how they're gonna respond to whatever you say. If you say no to something, you're like, "Oh, we can't afford that," they're gonna be like, "Mom and Dad are being stingy and they're keeping me from being able to do what I need to do." That's how 18-year-olds think Now, another thing that I did like that Brian said was that kids need to have skin in the game. However, we disagree about how we allow them to have skin in the game. A child's responsibilities can look like multiple things. It can- we can say, "Hey, I'm going to pay for your tuition as long as you're attending class and maintaining good grades." They need to be doing that. And you need to lay out a plan in the beginning. Four years of college. I'm planning to pay for four years of college. I will not be paying for five years of college. I will not be paying for six years of college. If less than 50% of college graduates graduate in four years, my kids had better be in that 48%. My kids had better be the ones that are graduating in f- four years, because after that, I'm not paying anymore. You need to stay focused and make progress towards your future. So this is part of the parenting that continues on. When they're 18 to 22, guess what? They're still children. They may be adults, but they are still children. They need you to guide them. So guide them. Participate in their choice of school and major, and have them work to pay for things like entertainment, upgrades, any extras they want to have. You can cover their room and board, but let them go to work. Let them get a job. Let them work on campus. Let them work at a restaurant. You know what? Your kids probably need to do some sort of service-based work anyway. Work in retail, work in the restaurant industry, and learn how to work with difficult people. Your child's investment does not have to be debt. It doesn't even have to be financial, but they have to be fully invested in college, even if that just means attending classes and making good grades. So where I disagree with Brian is that using loans creates responsibility. It doesn't. I do not believe that families should deliberately take out student loans when they have another way to pay. I don't think they should take them out even if they don't have another way to pay, but that's beside the point here Debt can complicate a parent-child relationship, and it could potentially follow the student for decades. The last thing I want when my child leads, leaves my home is to sever the relationship that we have as parent and child and turn it into banker and child. I don't wanna be their bank. I don't wanna be the person they come to, the person that is second-guessing every decision they make because they owe me money, or because they should be saving money to pay that back. You can go back into my archives where I have an episode called Parent PLUS Loans are Insidious, because every person that I've ever worked with where their parents have Parent PLUS loans, they're stressed out about having to pay them back. They feel bad about, "I'm keeping them from retirement because I have to pay back these Parent PLUS loans. I'm keeping them from being able to sell and buy a new house. I'm keeping them from being able to whatever." And now, that's on your child. Your child feels the burden of your financial decision because you decided to take out a Parent PLUS loan and expect them to pay you back. On the flip side, any parents that I know that have taken out these Parent PLUS loans, they then are upset with their children because their children are making these terrible decisions, and they should be paying them back. It changes the dynamic. The Bible says the borrower is slave to the lender, and if I am lending money to my child, expecting them to pay it back, and that's a lot of times Parent PLUS loans, it's on the parent, but the parent has made a handshake agreement with the child, an 18-year-old who does not understand the long-term ramifications of anything, because as a child, they feel like they're going to live forever. That is just the Superman mentality of an 18-year-old They do not understand the ramifications and they do not understand the handshake they are making with you. If you say, "Hey, you're gonna pay me back," and then they go out and buy a car, you're gonna be upset with them Creating Changing the dynamic of the relationship is not what you wanna do either, and sometimes people don't think about things this way. And now look, I'm telling you all these things from my side, okay? I am a child who was not told that I couldn't go to a school. I was not told what I was signing up for. I had no idea that I was signing up for six figures in loans. I chose a beautiful school because it looked good, and it felt nice to be on the campus. I borrowed somewhere around $150,000 without understanding that I was taking out a loan, and I had no idea the long-term impact of the papers that I was signing. I took the loans to pay for school, and I worked multiple jobs to cover all of my extras. I worked in the movie industry, I worked at a restaurant, I worked on campus, and I worked for a concert venue. I did all of that, but I didn't use any of it to make sure that debt was not created because I did not understand what I was doing. I did, however, have a really great work ethic because I wanted to pay for all the fun things that I got to do, and I wanted to pay to live off campus. The loans delayed my financial plan by roughly 15 years. That was 15 years of stress, two and a half pounds of stress weighing down my body Two and a half pounds is a rough estimate based on the weight of the bills that I had in my life in 2015 when I decided to get out of debt. Please hear me say a prestigious school is fine when scholarships, savings, and preparation make it genuinely affordable. Do not borrow six figures simply to attend a name brand university. Parents can give generously to help with tuition, room, board, or even a stipend when they can do so without borrowing or neglecting their retirement. Students have the ability to carry responsibility through effort, wise choices, and contributions, not lifelong debt. Don't set them up for failure. Don't set them up for a lifetime of pain and anguish because you wanted them to take out loans to have skin in the game Parents, this week I want you to take one step towards strengthening your own financial foundation, and have a one open-ended conversation with your child. Depending on where they're at, it's going to adjust what you need to talk to them about. Go ahead and ask your kids what they think they're naturally good at. Ask them what problems they enjoy solving, and what kind of life they hope their work will help build. Your job is not to hand them a perfect future. It is to help them build a wise one, without attaching an anchor they may have to carry for decades. Thanks for coming to this bonus episode, Accelerators. Go out and make a difference