How Much Should You Invest in Your Child's Education

This is a rather tricky question. While some people feel that it is the duty of any parent to give their kids every opportunity to succeed (even if that means putting themselves in the poorhouse to pay for Ivy League schooling), others believe that the minute a child becomes an adult at the age of 18 they need to go out into the world and make their own way. But the world we live in is an expensive one, and most people need a college degree before they can earn a decent wage. This catch 22 can make it pretty difficult for a student to actually make enough money to pay for tuition and living expenses. And taking on school and a full-time (or even part-time) job may cause a student’s grades to suffer. So for parents that want their kids to go to college in order to secure a brighter future, the question remains: how much are you willing to pay? Let’s start with the legal aspect of this issue. Actually, there is none. Parents are not required to pay for a child’s college education (except in extenuating circumstances, such as a divorce agreement). What is unfortunate is that while students are solely liable for paying their way through college, legally speaking, the amount of federal financial aid they may receive is based not on their own earning potential, but on that of their parents. Ouch. When a student applies for federal financial aid (via FAFSA) they are required to include their parents’ income tax returns as part of their application. The government uses these documents to determine the expected family contribution (EFC) based on both income (plus assets and benefits) and expenditures (pertaining to other kids in college or soon to come of age, for example). So if parents earn enough money that they should reasonably be able to pay for a portion of schooling, a student will receive less federal funding, regardless of whether or not their parents actually can (or will) help them. Of course, this brings us back to the issue at hand. How much SHOULD parents contribute? In truth, this depends largely on the situation. Suppose a kid works his butt off to get good grades in high school, earns a partial scholarship, and even takes on a part-time job to go to college, but he still has additional expenses. At this point parents should definitely do whatever they can to help (within their means). Some parents will go so far as to take out loans on behalf of their kids or even dip into retirement in order to help. This probably isn’t the best idea, but to each his own.

However, if a student spends his time in high school goofing off, cutting class, and basically throwing away his future, the best thing parents can do is cut him loose. This may sound harsh, but enabling your kids by continuing to support them gives them no incentive to grow up and take responsibility for their own lives. They may go to college and dabble in all manner of subjects, from English or math to foreign affairs or forensic social work. But until they are forced to take care of themselves they are unlikely to change their habits. Why would they? In this case, cutting them off financially is probably the best thing you can do. When people have to take care of themselves they find a way. So should you invest in your child’s future? Of course! Just keep in mind that not all forms of investment involve money.