We aren’t saving for our daughter’s college education. Matter of fact, we had a 529 set up and we cashed it out. (And yes, I’ll tell you what we did with it here in a minute).
Now call me crazy, but for our family, this is the best choice. It’s not that I don’t believe in the value of a good college education. I agree with my colleague G. Brian Davis that college can be an important step to building lifetime wealth.
However, to be a great investor, a college degree is not required. I will say I’ve made a lot of money (and traded less time for dollars) flipping properties and my banker has never once asked me if I have a college degree.
Simply, I just don’t believe that going to college is the key to being wealthy.
College Isn’t for Everyone
For starters, not everyone is ready for college when they graduate high school. Maybe they don’t know what major they want to pursue or maybe they are wholly unprepared for the classroom experience. I was a straight-A student in high school yet racked up my first C in freshman chemistry. I didn’t adjust well going from a class of 25 to 500!
According to the National Association of Scholars, there are many other reasons why a college education may not be right for many:
- Not everyone can afford to go to college to begin with. College tuition prices have soared in the past 20 years. Although there are so many ways to pay for a college education, most students will have to take out debt to cover their tuition bills in an amount that may be a crushing blow to their ability to generate wealth later in life. Case in point: I have one previous colleague who has racked up $182,000 in debt (they are not a doctor or vet) yet makes $55,000 annually. That debt alone is crushing their ability to get ahead.
- Even if you do go, if you don’t finish, it will be a waste of time. In 2006, 50% of students did not finish in six years. And if you took on debt, this is like paying a mortgage on a home that you don’t have a title to.
- Even if you don’t incur a lot of debt to attend school, experts argue that you may be paying too much for too little of an education. There are many open-source and online programs that are cheaper, or even free, that rival many four-year programs. My friend’s husband is a serial entrepreneur, and he made his first million by having a great idea, not a great degree.
- By going to college, a student delays their opportunity to earn an income, creating an opportunity cost. For some degree-holders, this is worth it (doctors, lawyers, engineers, etc.). However, many employers aren’t requiring a four-year degree anymore, instead of looking for aptitude and entering their teams in specific training and certificate programs. My brother-in-law (and several of his friends) are well on their way to financial independence by getting a certificate in a hospital software program. And there are many other companies that no longer require a college degree.
- College culture can produce toxic habits in young adults that can impact their earning potential. This is especially true if they can’t kick the bad habits. With the advent of social media, a “bad night in college” documented on social media can ruin a student’s earning potential for years to come. Such behavior is not limited to the college campus, either.
Wealth Lessons Are Not Learned in College
Just because someone doesn’t attend college, doesn’t mean that their path to wealth is doomed. What really deters me from pushing the requirement of a four-year degree on my daughter is that currently, the skills she needs to learn in order to create wealth and keep wealth are not taught in our school system. And I hope this changes!
Take, for instance, me. I hold a dual undergrad, two advanced degrees, board certifications, and more initials after my name than in my name (and I have a pretty long legal name)—yet I don’t work in my field of training anymore (sound familiar?).
Let’s hypothesize that my college education was critical in some fashion to my path to wealth. I ask why? Who here took a college course on how to create a household budget? How to save your hard-earned salary? Invest in a 401(k)—or invest at all?
I know I didn’t.
In a podcast I recently hosted with two partners of mine, we recanted our financial independence stories. What was common across all three stories was our abilities to buck the traditional narrative (college, marriage, house, kids) and learn what it actually takes to create value, save, live below our means, and invest.
So, What Is Our Plan?
I did not need any of my degrees to achieve my wealth. And with the way the world is changing and technology is advancing, neither will my daughter. To build wealth, you need to be able to do four critical things:
- Learn how to create value
- Store that value (save)
- Live below your means
- Invest the difference wisely
And I am not naive enough to think that she won’t need an education to make this happen, be it from us or a program to help her close her learning gaps. However, I don’t believe it has to be a four-year degree where she (or we) goes massively into debt to make it happen.
As such, here is our plan to help our daughter learn these critical skills:
- We are looking at ways to alternatively school our child, add in an unschooling curriculum, and teach her all of those financial lessons we wished our parents taught us growing up.
- As our daughter grows, she will need to learn the ways of the world and business and we will pepper in support for her to supercharge her entrepreneurial skills through a program like Acton Academy or other open-source education models.
- All the while, we are teaching her how to create value, save, budget, and invest for cash flow and growth through games like Monopoly, Cashflow for Kids, and The Abundance Game.
- We are also involving her early in real-world investing, where she can tangibly see how she can put her money to work, earn passive income, save it, and invest it further and positively impact people’s lives in the meantime. In fact, she’s invested in two properties with me already! She is also learning how to run the business at the same time.
- Looking forward 10+ years when she is ready to graduate high school, she will have a choice to go on to college if she chooses or enter the workforce in another capacity. I can’t even imagine what fields will be open to her, but here are just a few that are open now that don’t require a degree:
- Computer programming
- Sales (i.e., SalesForce, SalesLoft, etc.)
- Fields we haven’t even dreamed of yet!
Regardless, we know that the life skills she needs to be truly wealthy are learned early, often, and not in school.
Wrapping It Up
I’m not arguing that someone should not go to college if they have the drive and can afford to do so, only that going to college doesn’t guarantee wealth.
Creating wealth boils down to learning how to create value, save that value you created, live within your means, and trade that value creation for streams of income. This type of education is invaluable.
I know many of you are dying to know what we did with the 529 plan we cashed out.
Well, we bought our daughter a rental. One that cash flows and stands a reasonable chance of appreciating. She helps manage this house (yes, even at eight years old). By the time our daughter graduates high school, she can either sell it and pay for her college degree, if she chooses to go for one, or she now has a nest egg—along with all of the financial wisdom we can teach her—to launch her investing career.
Either way, she wins.
Are you cashing out your child’s college fund or sitting tight?
Tell us your thoughts on the value of a college degree in the comments.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.