Canadian Version

In Canada, education is mostly subsidized by the government. One whole year of tuition in one of the best known Canadian Universities (McGill University) costs only $3,000 Canadian Dollars ($2,300 US). This is the kind of money a student can earn waiting tables during the summer. Or a parent could very easily give the $3,000 to the child without jeopardizing his/her retirement.

Graduated studies are not subsidized. But at this time, with a 4-year degree, a student has a strong base. If he/she goes into graduate studies, this becomes a business decision, not different from buying an asset for your business. If I buy asset A, and I can get X return for my money, is this a good financial decision?

U.S. Version

I asked this question to a few mothers:

If you choose between money for your retirement and or money for your kid’s education, which one would you chose?

I got these answers:

1. I would pay for my kid’s education even if I have to live on the streets when I get old.
2. I would help out if my kid was enthusiastic about learning. However, if he/she has little interest in education, I would not force him/her and use the money for my retirement.
3. I would help out if I see that I will have the potential to increase my earnings in the future and catch up on my own retirement.

I didn’t find anyone who would just not contribute.

Black or White. What if there is no in-between, you have a hard choice, your retirement, or money for your child’s education?

When a kid wants to go to school, there are many ways to pay for their education, from scholarships to student loans.

When you are an older parent with no money for retirement, you won’t be able to find a loan to fund your retirement life.

I always get anxious when I get asked this question:

Should I cash out my retirement account to pay for my kid’s education?

The answer is always “NO”

If you have enough money to fund your retirement and your kid’s education, yes, go ahead, help out.

But if you don’t have the money, you don’t have the money. It’s as simple as that. Don’t do it! Don’t deplete your retirement account, or any account, for your child’s education.

If in the future, if you are doing well, then, in that case, help your child pay his student loan. Give him/her some money as a birthday present or Christmas present to reduce the burden of the loan.

There are other benefits to not paying for the education of your child if you don’t’ have the money.

The child will have skin on the game

Brand Name Schools

It’s my belief, that brand names schools are overrated.

If the child has to pay for the education, he will forgo the brand name school and go for the lesser-known school. If you pay for it, the child may decide to go to a bigger brand.

The Return on Investment of the Education

When the parents are paying for the education, the child may choose a career that has no employment opportunities. Things like English Literature and Art History come to mind. Starbucks and other coffee shops are full of English major barista.

On the other hand, if the child is paying for education, they may choose a career that will assure them a job. Sure, Accounting or Engineering may not be as interesting as reading Shakespeare, but I have never seen an accountant working at Starbucks serving coffee and cleaning tables.

You may become a burden on your child’s life

Assume that you do sacrifice your retirement savings in order to pay for your child’s education. Now, at old age, you find yourself living from social security or any other form of government help. This is not a romantic vision, this is a life full of hardships.

At this point, your child has two choices. To leave you on your own, with your economic problems, or deplete his resources in order to help you out. If your kid becomes wealthy, maybe this would be a privilege, to be able to help out his parents. But if the kid has his own economic struggles, your financial struggles will represent an additional burden on them.

Anecdotal Evidence

I do know a mother, she is in her mid-60s. She told me that she sacrificed every penny she had in order to pay for her child’s education (and she is proud of it). Well, here she is, in her mid-60s, with no money in her retirement account.

Maybe if she didn’t pay for her child’s education, she would have spent the money on something else. We will never know, but I do speculate. If she would have put that money in her retirement account, she would be better off today. Maybe she would be in a condition to retire instead of worrying about how to pay the rent.

What are the Solutions

Have that conversation with your child. Let him know that you can not help, or if you can help, then let them know how much, and then help them. They should:

• Apply for local schools
• Apply for scholarships
• Try to use a community college and then transfer the credits

College may not be the right fit for everyone

Some people are just not a good college match. There are many other opportunities out there not related to college.

I went to a 4-year college program and it was a waste of money. I resent all the time I spent studying for exams; all the money I spent; all the hardship; the opportunity cost in my life and my finances.

I have earned my living from investing in real estate, investing in the stock market, teaching dance, photographing weddings and events, blogging, and Podcasting. I don’t use any of the skills I learned in college. So far, the only skill I learned in college is to study to pass an exam.

There are so many alternatives to a 4-year college career. My friend Benjamin makes a beautiful living as a dog walker. My friend Elijah is a great music teacher. My friend Raja cleans windows. My business partner Cheryl is a fantastic dance teacher. My friend Jimmy is a great website builder. And somehow their quality of life and level of happiness is higher than a person who works in a cubicle.

Also, there are so many alternative available to the traditional college structure. There are all kind of affordable and flexible online classes such as Coursera, Kahn Academy, Udemy, LinkedIn Learning, and so on. It’s easy to get started, from getting your books directly from an educational book publisher at lower price, to getting all the educational material for free in the Internet. After finishing any one of these online programs, you will find a world of opportunities available to you.

What would you do if you have to decide between your retirement or your child’s education?

Please leave the answer in the comments

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