Posted on 02/10/2011 12:30:24 PM PST by CSM
Why retirement before college?
Dear Dave,
I noticed that your Baby Steps list puts saving for retirement before saving for your kid’s college fund. Sending your kids to college would come first on the timeline, so why do you suggest this?
Jen
Dear Jen,
I advise this approach because everyone is going to retire someday, unless, of course, they happen to die before reaching retirement age. Retiring and eating are necessities. College is a luxury. Lots of people succeed in life without going to college, and thousands have worked their way through college. I worked 40 to 60 hours a week in college, and I still graduated in four years.
Having a college fund set aside by your parents is really nice, if they can afford that kind of thing. But you can go to school by getting good grades, applying for scholarships, working your tail off, and choosing a school you can afford. I believe in education, but there are lots of ways to get a college degree other than having your parents foot the bill.
The last time I checked, there aren’t any good ways to retire except for getting yourself ready for retirement. I mean, you can always live off Social Insecurity and buy that great cookbook, “72 Ways to Prepare Alpo and Love It,” but I don’t consider that a plan.
In short, college funding is not a necessity. That’s why it follows saving for retirement in the Baby Steps. Should you try to save up for your kid’s college education? Sure, if you can. But there are lots of parents out there who won’t be able to pay a dime toward someone’s college education. And that doesn’t make them bad parents!
—Dave
Why insurance and not warranties?
Dear Dave,
Can you explain how you view the difference between warranties and other types of insurance?
Anonymous
Dear Anonymous,
The purpose of insurance is to transfer risk that you cannot afford to accept. Let’s look at life insurance as an example.
I recommend having about 10 times your annual income wrapped up in a good, level term life insurance policy. If you make $50,000 a year, have a family, and you don’t have $500,000 saved up, then your family cannot afford the risk of you dying and losing that income. In cases like this, you buy insurance to transfer the risk. Now, once you have that kind of money saved up, and especially if you have no debt, you won’t need the insurance policy, because you’re self-insured.
When it comes to items like warranties on things, I look at it this way: If you can’t afford for the item to break and pay out of your own pocket to have it fixed without it crushing you financially, then you can’t afford that item. Don’t go out and buy some big, fancy computer if you can’t afford the repair shop bill if it crashes.
You shouldn’t be buying stuff if you’re that broke. Period!
—Dave
A good one. Enjoy.
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My son is paying his way through college as I type. I paid my way through college, along with the Army helping me - and trust me, I EARNED every dime, LOL!
Neither of us are the worse for wear.
My sister? My parents paid for her 4 year useless degree. She has never used it and has always worked menial secretarial jobs becasue she decided she ‘didn’t like teaching’ after all those years of college. *Rolleyes*
Money down the toilet, IMHO.
Dad gave me an equal amount in cash that he gave Sis for school. I have lots of assets; she has a beater car and rents and continually has her hand out to Dad for more! I now take care of my widowed Dad and make sure all of HIS financial ducks are in a row as we stretch his remaining dollars into the sunset...
Now, which ‘investment’ paid Dad bigger dividends in the long run? :)
Love it! It just kills me to see how many people think they owe it to their kids to pay for college. It’s one thing if mom & dad can afford it, but it’s quite another if the parents put that college fund ahead of their own needs.
I say this as a parent who firmly believes that kids come first once you have them, that you must always consider their welfare in whatever you do while they are still minors.
You are a good daughter!
One of the best things that parents can do for their kids is to ensure that the kids won’t have to take care of the parents’ during retirement.
He is a great Dad! :)
So true.
My hearing aid warranty still has another year but my hearing aid salesman informed me that to continue it after that expires, it would cost me $200 per year, per ear. They cost $2500 apiece and it insures against, loss and normal wear and tear. Also $500 deductible for loss and replacement.
Does anybody think this is a good deal?
I’ve talked to my insurance agent to see what kind of deal I could get from him and all he has said so far is that they could be added to my home owner’s insurance and be treated as “jewelry” and it would be “expensive”.
You and your sister sound like my husband and his brother. Their parents paid for his brother to go to a good college. He screwed around for a couple of years and dropped out. Hubby volunteered for the Army during Vietnam, so he could get the GI Bill and paid his own way through college, graduated with a degree in a good paying field. Brother never has managed to keep a job. Oh, he has LOTS of grand “get-rich-quick” ideas and has borrowed hundreds of thousands of dollars off family members over the last 35 years, but he’s spent the last 7 years living rent free in another family member’s rental property, because the family member “can afford it.” He was supposed to be looking after their widowed mom’s finances, which I thought was like the fox watching the hen house, but Hubby trusted his brother. He thought there were limits to what his brother would do. So, after his brother spent all their mom’s money on stuff for himself and ran her $75K into debt, guess who got to bail her out? Then we moved her out to live with us.
This is the same genius who told Hubby that spenders are better with money than savers, because spenders know a lot of things to do with with money, where savers only know how to do one thing-save.
Amazing, isn’t it? And I hear stories like that every day on how different siblings from the same two parents can be when it comes to money. A good friend of mine has been tied up in court for years because her brother raided their father’s money and spent it all, leaving her and her sister without any inheritence.
The brother basically got away with it, filed bankruptcy, etc. and they can’t touch him or his assets, which are in the millions. Grrr!
But, there WILL be a ‘judgement day’ down the line for him. :)
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