August 2024
However, many young people are also realizing that a college degree may not be absolutely necessary for a successful career.
Modearn™ Advisors Patrice Bening and Kevin Rex discuss how to best support your child through the complex journey of college planning, or even how to prepare them for life after high school should they decide against the traditional college path.
Here are some key takeaways from their conversation:
• It is important to start the college planning process early. Try to understand your child’s interests and goals, and if they would prefer to attend a small or large school, close to home or far away, etc.
• While it may be easy to get caught up in the prestige of an institution, it is crucial that parents and students focus more on what each school offers in terms of opportunities, experiences, and overall fit.
• Patrice recommends tools like 529 plans and saving early to maximize compound growth.
• Have open conversations with your children about college and financial costs. Consider other options like community college together. It is important to maintain a balance of being a guiding parent while letting your children make informed decisions for themselves.
• Kevin mentions that he and his wife diversify investments for education through 529 plans, life insurance, and custodial accounts to provide flexibility and options for their children should they choose not to pursue college.
• Patrice shares her positive experience with a college counselor who helped her family navigate the often overwhelming and emotional process of applying to college.
Watch previous episodes here:
Smart Tips for Effective Cash Management
Invest in Your Career: How to Maximize Your Benefits
Hi, and welcome to Morton Wealth's Couchside Conversations. I'm Kevin Rex. I have my partner, Patrice Benning here, and we get to talk about a wonderful topic of planning for our children's education. We're both passionate about this because it's something that we're both going through. And I think our entire social network, our family, our friends, it is top of mind.
Our kids are our everything, and we want what's best for them. And so it's always something that is, are we doing what we can? Are we giving them every opportunity possible? And Patrice is the guru here at Morton Wealth when it comes to all things college planning, all things education planning. And so I'm excited to be talking to you about this.
Definitely. I think there's graduation buzz in the air. As we've seen in the news, our friends are celebrating around us. And I think that even for me personally, as my oldest is, wrapping up high school in a couple of weeks, it really makes you take a step back and think, have I done everything right? Have I supported my child in all the right ways?
Did I give them the right resources they need to thrive, and I think a lot of times we've have conversations around how important it is to have a healthy journey towards that destination, but more so is that not to get wrapped up in what the rest of the world thinks, which you do, versus what they truly should be doing.
So kind of really like thinking about our personal journeys. Obviously I came from Romania. I did go to college here, but it was a very different like 25 plus years ago. And then for you, you were born and raised here. So you went to college, but maybe you can share a little bit of what that would look like for you.
And then we can start from there.
Yeah. I think if I had to wrap up my kind of educational journey, the, the one word I would say is overwhelming. And I think the main reason was my parents didn't go to college and so they didn't have personal experiences. And when I started looking at what I wanted to do, it was almost more last minute and it was kind of junior year.
Everyone starts saying, well, what are you going to do for college? And it's like, oh, well, I don't know. I haven't really thought about it. And so I think if we could have started over for my own life and what I'm trying to impart in my own family is starting early. And when I say start early, it's not, you know, from the second you conceive, but as you start raising your children, it's understanding the type of people they are and where they want to go.
There's over 6000 colleges and universities in the United States. And so when you think of like, hey, where do you want to go to school? Like, how do you even start that process? And I think it's really important to say, okay, well, who are they? What experiences do you want them to have? What experiences do they want to have?
And it's in-state, out-of-state, small, large. It's, you know, are there certain majors that they're interested in or certain fields that they're interested in? And I think it's really important to start playing the game of not, where do you want to go? But what do you want out of that experience and what's important to you when it comes to universities?
That's really actually the best way to put it. And I'll be very honest, a year ago when my oldest entered his high school year, he literally looked at me and he said, Mom, I'm just going to go to whatever school accepts me. And I literally had a panic attack because he said, I have no idea what I want to do or study.
And to my mind, everyone it seemed around me, all my friends, they had kids that knew what they wanted to do and I said I failed. How can he not know what he wants to do? Because it's almost like we are supposed to know what we want to do, but I did not know necessarily what I wanted to do when I started college.
It was more of a family member saying, Patrice, you seem to be good at math, you should do finance. And I said, okay, sure, I'll do finance. But I never took the time to really, you know, figure out if that's truly that was my passion. However, I would say even thinking now, nine months later, he's going to go to a school that actually wants him to be as undecided as possible.
It's a liberal arts college and I'm so excited for him because he has the time to really discover what he wants to do. He is saying economics now, which puzzles me because he's never really been interested in what I do. But that aside, what the future holds is really up to them and not really what the school they're going to go to.
I think that's what's really important to emphasize here.
Yeah. I think you bring up a great point. I think our social circle, where we live in our community, a child's born and the parent puts a USC hat on, a Harvard hat and it's like, hey, my kid's going to go to this school. They're going to play professional baseball. There's so much pressure of, this is what my child's going to do.
And they start from such a young age. I think there's such a detriment to our children. When we narrow the scope too much. There's the fear of also so broad, like, I don't know what I want to do, and I'm not seeking that too. But I would actually lean more towards the blank canvas. And the main reason is that you're 14, 15, 16, your son's 18, 19.
There's so much maturing that's going to happen. There's so many life experiences that are going to happen. You don't know who you are. They don't know what every profession is out there and thinking about younger children. There's professions that don't even exist. Right. We're just talking about AI and how that's going to change our world. Like to know what you want to do at a young age and say, this is what I'm doing and where I'm going.
I think it really limits our children. So having a more broad scope, and that's why I always go back to what do you want out of your educational experiences? What are the things that are important to you? Class size was a big one, especially for me, where I wanted to go to a school where I had the option to either go to a small classroom where there were 12 students, and the professor was like, hey, Kevin, you didn't come to class today.
What's going on? But then there was also these lecture halls of five, six, 800 people. The professor had no idea who I was. I could only go to office hours and talk to the TA. But I had the option to do both because that was important to me. Knowing that eliminates that 6000 universities, you know, might cut it in half or make it much smaller.
So again, understanding who your child is starting early on, the things they care about and what you know really drives them is important.
And to your point, let's say you're a student athlete and you're really honing in on one particular school. I've learned that a lot of kids may really get attached to a school because of the sport, but they don't really consider, I think they call it the broken leg factor syndrome or that, if, let's say one month in, you have an injury that's going to take you out, you can't play anymore for the rest of the season.
Now, do you still like that school. And so based on that, it's kind of really looking at the whole picture. Is it you know, to your point, if I'm going to be in an area that's more rural or, you know, city, do I like the school if I have to stay on campus, if there's a snowstorm, you know, and I'm going to be all locked in, do I want to be locked in in these particular walls?
So I think it goes above and beyond that, but really taking the time early on to have those exploratory conversations with the kids. And there's really like, you can start as early as middle school and sharing your own personal experience of what that looked like, because there's definitely other factors that come in that I know we're going to talk about financially.
And also just kind of thinking about, you know, how to truly figure out something that aligns with your passion and the person that you are.
So, yeah, so take the broken leg syndrome and apply it to a major. Oftentimes it's like, I want to be an architect, I want to be an engineer. And so you pick the school that's best at that. And we both know over 80% of college students change their major at least one time. And then taking that even a step further, just here at Morton, I would put our CEO and Chief Investment Officer up against anybody.
They weren't finance majors. Jeff was a biology major. Megan was an English major. Obviously, they've gone to graduate and got an education in finance once they figured out that's what they wanted to do, but to pick a school solely on a major that you most likely aren't going to graduate with just really limits you. So picking that school for multiple reasons, many different things that you care about, I think is really important.
I'll also say something as far as not knowing is okay. So I know in our community there might be a little bit of a negative stigma around a more nontraditional path of going to school and utilizing something like a community college. Your child doesn't know what they want to do, they don't know where they want to be. Giving them a year or two to mature and figure it out without having to pay the high cost.
Is that anything that you considered, or was that something that you know you would recommend to the people that you work with?
Absolutely. And I think even to kind of understand, I would say the last couple of decades, the landscape around the college admissions process, has become really dire. And it's almost it's terrifying in the sense that you have exceptional children that have a great resume, both either academically, and personally, they do a lot of community service. They get, you know, very involved at the school, they excel at what they do, and they can't get into San Diego State.
Which was a safety school back when we were applying. It's yeah, very challenging.
So I think it's trying to figure out and I think the most beautiful thing about a community college cost aside, which is obviously a wonderful thing to have, is that they do have a pathway that if you followed the UC track, if that's something that your child wants to truly pursue, there's a way to do that and you can do it smart.
So all we have to do is kind of just remove the, you know, the big flashy names out there that that's like, oh, so-and-so got into Princeton or so-and-so got into MIT or Stanford or Berkeley. It's like, that's great for them but I have learned personally that that college admission process is really anybody's game. And it could be one thing or no thing that makes you stand out.
So I would say focusing or where we can control because once you've done everything that you can, it's truly knowing what your options are and just kind of, you know, feeling confident and comfortable with those options. So I 100% endorse community colleges.
And whether you're at Stanford or San Diego State or community college, biology 101 is biology 101. So the curriculum doesn't really change. The education doesn't really change. I think what a lot of us focus on is, yeah, but the prestige of it, but the network you now are tied into a network of people that are going to be successful.
And that can be extremely valuable if you tap into it. But it brings to the top of the table is if you're going to be a teacher, is the networking as important as if you're going to be an entrepreneur or you're going to go into some form of business, and that might be worth paying the higher costs versus someone that's going into a line of work that doesn't necessarily need to have relationships all over the country.
So again, valuing certain parts of what a university or the school that you're going to go to brings... bringing it back to who your child is and the path that they want to be on.
And I think it's a good reminder just because you go you just because you go to a prestigious school doesn't mean you're going to have career success. So really, there's a great book that says where you'll go is not who you'll be. So by Frank Bruni, he's a New York Times columnist. And really, I've learned a lot from that book and just kind of level set my expectations just because it's easy for me to look around me and, you know, look on social media and get caught up in all the stuff that's like, oh, he should have done this, and he could have done better.
But it's like our kids end up where they need to be. And, and they really do.
That's their journey. So we talked about starting early when it comes to figuring out who our children are, where we want them to be, where they want to be. We can't ignore the cost of college, the cost of even high school, middle school, elementary school- education is expensive. And I think a lot of times we think of just the cost of the school, but it's it is the extracurriculars, it is the tutors.
It's everything that goes into it. This is your expertise. You're the best and pro at this. What are some suggestions you would share with us on how do we financially prepare? What are the things we should be doing to be in the best position from a financial standpoint for our children's education?
I started yesterday number one. no. So joke aside, money. Yes. starting early then, I think there's a wide variety of tools and resources at our disposal that we can use. I would say from a planning perspective, the 529 college savings plan. Widely available, I think one of the best tools, just because there's no limitations, truly, on how much you can contribute.
I mean, on the broader scale of things compared to, let's say, a Roth IRA, or other custodial type of accounts. But you can be very smart, even life insurance. I think there's, you know, some things that we can utilize. But I would say understanding I mean, not that when my son was born, I was like, yes, he's going to go to UCLA or something like that.
I think it's just kind of trying to gauge as your child gets, you know, goes through, grows up, is have an idea of how much you think, you know, the direction that your child's going to want to go. So if you're going to stay in California or if you're going to go out of state, look at those costs because let's say at UCLA, which, you know, it's here in California for California residents, you're looking at 30 to $35,000 a year.
Inflate that 18 years from now. If you have a baby right now, you're looking at $350,000 in 18 years.
That's crazy. And I think that's without room and board. That's just just the education.
So how much would you need to put in if your child's born today, how much do you need to save to send them to UCLA?
So $600 a month. That's assuming more of an 8% growth rate over the next 18 years.
And one child, you have three children, that's $1,800 a month.
So private school out of state. You're looking at $80,000. take that over 18 years and grow it with inflation. You're looking at, you know, $800,000. We're using rough numbers for four years. For four years. So, you know, we're looking at $2,000 a month for you to save money per kid.
From the day they're born here. I needed to start yesterday. And I think most of us probably need to start yesterday. You had a fun tip for me that you were sharing earlier. Like I waited till my children were born. We opened up a 529 so my parents and family members could contribute. There was a fun tip that I had no clue how to use.
So can you share that with us?
That you can open a 529 before you even get pregnant? Yeah, yeah, that's super planners. So if you really want it, it's like something that, you know, actually anybody can open a 529 and you can name your spouse's the beneficiary. The beneficiaries can always be changed. So kind of same thing, some families choose of one 529 even if they have one, 2 or 3 children and then they just fund that one particular account, they use it for one, they change the beneficiary to the second, and so on and so forth.
There are some new like nuances now with the Secure Act 2.0, that what you can do with the leftover, 529 funds. So if you have several kids, those funds can be rolled over into a Roth IRA. But yeah overall you can definitely start very early with that.
What I hear a lot of times is college has to change. It's so expensive. At what point are we as the consumer is going to say, I'm not spending this amount of money. And so a lot of my friends are worried about over funding their college education. And so it's what are those options you to have the option to use a Roth IRA for a portion of it.
That's where some of those other investments come in. So you can kind of diversify where it's not solely aligned for education use, but you have options. And so that's where I think planning comes in. And then also understanding as a parent, I have clients that say, I want to pay for every penny of my kid's education, like education is paramount.
And I will cover that. I have others that say, hey, I'm going to give you 30,000- everything else is on you. So if you want to go to a state school or if you want to go to a private school, that's your choice. And so having an understanding of what your goals are as a family will make that difference on how much you're saving and how much you need to prepare for.
So I think, again, going back to the planning early on of where does education fall? If you start early enough? There's also you can use your 529s now for primary and high school and up to a certain limit. And so if you start early enough you might have funds. Now the real benefit of 529 planning is to let it grow tax free, tax deferred till you use it. So time is on your side. But that's starting early is definitely the key from a savings perspective for sure.
And I think even as as you get closer to I would say once the child's in high school, I'm a big proponent of transparency and having healthy conversations around money, and I know the two of us have talked about this in the past, but I would say that it really creates a different awareness. It's not that you want to scare kids into like, oh, well, like they really get attached to a school, but I think you have to be realistic.
There's families that you know, cannot afford to pay $300,000 for four years of schooling.
So it's like even in, you know, we know that student debt is is crippling for most people. And it actually, you know, their studies show that I think it's over 71% of people that have come out of school andend up delaying making other major decisions, like buying a home or buying a car, or even like getting married or even starting families because that cost is so prohibitive and they have to deal with that first.
So I would say really looking at the whole bigger picture. So yeah, it's like going to UCLA if it's $40,000 a year and 40,000 is not a little money. so maybe you start at the community college for two, you save literally all that 40,000 and then you figure out a way how to to handle the rest.
Yeah, I think it's really important. So going back just kind of a takeaway from our conversation. It is a complex decision. It's a complex path and journey for us as families with our children starting early, both from the emotional and understanding awareness of our children. But then especially from a financial standpoint, putting money away earlier, you don't have to play catch up later.
And also compounding effect of time helps. And so if everyone can just take away the thought of starting early and if you haven't started yet, today's the day.
I completely agree.
That was a fun conversation Kevin. Thank you. So now we would like to play something we call 'this or that' where Kevin and I go through a series of questions that we technically have not prepared for. So Kevin, this or that, when it comes to education planning from a financial standpoint, 529s or anything else?
I believe strongly in 529s. I think they're extremely important, but I don't think that they are the end-all for most people. And so personally, my wife and I, we've diversified our investments through life insurance, through custodial accounts. And then 529. And the main reason for that is our children are young. I don't know who they're going to be, where they want to go, and I want to have options.
And so we have the college funding and then we have other investments as well that can be used for education now education and college. And so for us the right fit was to diversify. And it's going to be obviously a very personal question for each individual's plan. Okay. Now back at you, private school or public school, if you have the option to go to one or the other.
So it's very interesting talking about a personal question, I feel that answer really varies on one's personal beliefs and values. So I think number one, a lot with how you were raised. So if you went to private school, maybe you went to an all boys school or an all girls school. And that's something that's very important to you for your own children to do.
That's most likely going to be the private route. In all honesty, I think private schools, they top themselves on having more resources, smaller class sizes, so your child can thrive if you have, you know, even like to talking about big schools or small schools, right? If your child thrives in a small environment versus a large environment, that is something to consider.
but I don't think it's I honestly look at schools, like restaurants, you know, the two of us can walk into a michelin star rated restaurant, and I can come out with food poisoning and you'll come out with the best meal of your life. I will never go back again. You're going to tell all your friends about it.
So I would say schools are like that for our kids. They have to be the ones thriving in them. So just because a school is private doesn't mean our kids are going to do well in it, and vice versa on the other side of things. All right. So one more for you, Kevin. When you think about college, should someone go to college or should they not go to college?
I mean, the costs can be quite exorbitant. So what's your take on that?
Think if you would ask me that question ten years ago, it was my kids are going to go to college. I think that at that time getting a college education was almost mandatory. I think the world has changed as as college has changed as I've gotten a little bit older, obviously the costs have gone up. I don't value a college education the way that I used to, and I think a little bit of that is, why do I want my kids to go to school?
One, get an education- that's important, but a lot of it is growing up, it's you've been under your parent's supervision for 18 years. I want them to set their own schedule and get out of bed on time to go to class. I want them to manage their finances, and I don't think college is the only way to get those experiences.
So a lot of these questions, it really comes down to who the child is and what's going to be best for them. But I'm definitely much more open minded, especially when I look at going to school and paying what, private is $900,000. Maybe I'm talking myself into there being other ways, but I do think per each child, there's definitely other options in colleges.
So last one for our fun game here for you. If you had the opportunity to pay for support and help in making college decisions. So hiring a college counselor, would you think that's worth the money? Or would you rather just do it on your own?
Well, personally, I had to hire a counselor just because I truly found the entire process so completely overwhelming. So I needed someone to just even, you know, there's 6000 schools in this country. Not even talking about international options. So I needed help for my son to figure out, like, where do we start? So for him, it was not just because he literally had no idea what he wanted to do.
She suggested, let's eliminate the schools that you are not interested in. So he's not interested in engineering. He's not interested in sciences or math or technology. The STEM type of subjects. So then it was kind of it was great to work backwards almost into narrowing down a list of things. And I think that's having somebody you know, an advisor that's kind of, objective actually.
It also removes the, I would say the the banter between the parents. I want to be able to enjoy my son's last year of high school, and not for us to do this all the time. So I think she was able to be that for us and for him to even kind of just smooth out the wrinkles in a really hard process.
Thank you for joining us for another episode of Couchside Conversations. We hope you enjoyed this episode and we look forward to seeing you soon.
