I recently met with a couple who had two grandchildren. When it came to deciding about saving for the grandchildren’s college, they told me they wanted enough so that all of their grandchildren could go to any Ivy League school they might get into. This sounds on the surface like a very worthy goal. A couple of things struck me funny about this goal, though.
First, the amount of money that would have to be set aside for this goal relative to the couple’s resources was rather large. I wanted to make sure they could see this in black and white before committing to this goal.
Second, one of them had said something about paying their own way through college and having a hard time of it. I appreciated that they did not want their grandchild to suffer in that way, and asked them to acknowledge their desire wasn’t coming with any “baggage.”
Third, many people do not consider the additional costs of college on top of tuition: living arrangements, transportation to and from home if the college is distant, etc. I wondered if they really meant they wanted to cover the whole kit-and-kaboodle as a free ride, or whether the goal was more aspirational than realistic.
So I asked them, “You said something in the past about putting yourself through school. Tell me more about that.”
The husband elaborated on how hard it had been on him to work his way through college. When his son grew up, he partially helped his son through public school, but now he wanted the grandchildren to have no boundaries on where they could go.
Next I said, “Ok, that’s a very worthy goal. When you say no boundaries, do you mean you want to cover only tuition, books, and board, or also computers, apartment rent, pizza and beer money, flights home, and additional costs like that?”
I guess this is the question that made a fantasy turn real. They both looked as though they had not thought of this, and I was equally surprised at their response. I suggested we look at a range of expenditures, and see what the effect would be on their plan. They agreed.
In this case, their ability to have sufficient income for maintaining their lifestyle, plus travel, a second home, long term care insurance, and dining out three times a week would be affected by saving for a Harvard education vs. a public university one. With the Harvard education for two grandchildren, the probability that they could live the life they wanted was about 70%. This was not terrible, but if they chose the public university route, the probability went to 95%. This was much better.
I did not like giving them the news that they might not be best served to promise their grandchildren an all-expenses-paid Ivy League education. I asked, “This seems pretty important to you. Are you sure you don’t want to make some adjustments to these other goals, so you can achieve this one?”
The wife spoke first. “Absolutely not! I want them to have a college education, but I want to have my life, too.” The husband agreed, “Yes, it would have been nice, but, wow, I didn’t realize it would be that much.” In the end, to my surprise, they decided to fund a public university education, and no additional expenses.
Looking back, the speed with which they gave up the Ivy League dream suggests that a little knowledge about how much things truly cost can help make big decisions easier. It can also have a big impact on how you feel about the life you choose to lead.
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I wish I’d had this conversation years ago.
It’s not just grandparents who make these decisions with good intentions. It’s parents as well. And without someone like you to sound the alarm, parents can easily leave themselves in a difficult position because they wanted to do their very best for their kids. I don’t regret any decisions I made. But I wish I’d made them with more information and insight into my own future.