When I was a financial advisor, parents would always ask me what investment vehicle should they use for their child’s college education. Unfortunately this question typically came about 12-18 months before their child started college with less than $500 set aside. Maybe they mistook me miracle worker rather than a financial advisor.
Anyways, I used to honestly believe it was imperative to start a college savings account for your children. Back then I would have gotten technical and explained your options, but now I am not sure a “college” savings plan is the best option for your children or you.
Here are seven reasons you should reconsider setting up a college savings plan.
1) You Aren’t Contributing to Your Own Retirement
Just an FYI – You can finance a college education (although I don’t recommend it), but you cannot finance your retirement. If you aren’t contributing 10% to your retirement, DON’T save for your children.
2) There May Be Better Investment Options – Like Your Own Business
In the stock market, averaging 10% a year is a good return. However, if you start your own side business you can sometimes earn 10X that return.
Personally, I am pumping money into my Amazon FBA. Typical returns for me are over 50% a month. If I invest $2,000 into my Amazon business in a month, I expect a profit of at least $1,000 within 30 days.
3) Your Child May Not Go to College
PUBLIC SERVICE ANNOUNCEMENT: IT IS PERFECTLY OK IF YOUR CHILD DOES NOT GO TO COLLEGE.
There I said it…someone had to. Your child can still be successful if they don’t go to college. It just may not be for them!
The world is full of successful individuals who skipped college. We need great mechanics, awesome carpenters, electricians, and many more people other than college graduates.
4) Your Child Can Use the Money to Start Their Own Business
Let’s assume your child is smart (we all think so, right?) and wants to start a business in lieu of college. Well, college costs $40,000-$100,000 and you can start many business for under $5K.
If your child purchases a franchise after high school and works hard; who do you think will be ahead of the game in four years? The person who got drunk three days a week and learned theories or the person who started their own business? This obviously depends not the person, but my bet is on the person who owned a business.
5) Maybe There is a Better Education than College
Instead of spending $20k a year on education, maybe your child can pursue his/her interests. Why go to college immediately when it is virtually impossible to know what you want to do for the rest of your life at 18?
Spend a year or two working at places they may think is interesting. Wouldn’t it be better to learn at 18 they don’t really want to be a dentist rather than eight years of school and $250,000 in debt later?
6) Learn to Network
There is probably no better skill than networking. How great would it be if your child took an entire year and $5k to take millionaires out to lunch? Think of what they could learn.
Ok, I gave you six reasons you shouldn’t set up a college savings plan. What do you think?