Fool of Family Finance – Dean H.

April 20, 2009 by  
Filed under Fools of Finance

fool_financeI have decided to introduce a new “money and behavior” category. I am calling it “Fools of Finance”, in honor of our fellow citizens who act foolishly in their handling of our money (e.g., politicians) or their own money. When they make their money mistakes in a very public way, Mr. ToughMoneyLove believes it becomes fair game for commentary by others. If you throw me the bait, I’m going to take it.  

As the saying goes, some people are placed on earth so that their mistakes can serve as a warning to others. How fortunate for me and for us that the news and personal finance media provide numerous Fools of Finance candidates. So on to today’s award.

Getting it Wrong on College Funding and Retirement

Today’s Fool of Finance is Dean W., who wrote a letter to the editors of Money Magazine. Dean’s letter was published in the May edition, in response to an April article called “Ease the Tuition Squeeze.” This is what Dean said:

Right now I am faced with coming up with lots more money for my two kids’ college bills that I have been able to save for retirement in 30 years of working. But I am determined not to send my children to cheaper schools. After all, they have worked hard, and I will not deprive them of the chance to go to the best possible colleges.

Well, Dean, your expression of support for your children is admirable but misguided in several ways.

First, you express a willingness to sacrifice your retirement savings to a goal of sending your children to an expensive college. That being the case, I hope that your children have shown equal commitment to sacrificing their future standard of living to support you in retirement. Since you took the time to read at least one article in Money Magazine, how about finding the articles that tell you what a bad idea it is to re-direct retirement savings toward college tuition.

Second, you wrongly assume that being a “cheaper school” disqualifies a college from being one of the “best possible.” This is the attitude that the hundreds of mediocre but expensive private colleges have survived on for years. They love folks like you, Dean, because you will borrow and spend vast sums of money for an educational return on investment that falls into the “horrible” category. In exchange, the colleges will continue to raise tuition faster than the inflationary rate. (For more on this, read my article on the national disgrace of the student loan debt machine.) 

There are plenty of public universities that can more than meet the educational needs of your children. Do a little homework. The best school for your kids is one that is affordable.

Finally, Dean, the attitude that  “your kids work hard so they deserve this” is so wrong. The “I deserve this” mentality played a key role in the credit and housing bubbles that brought our economy to its knees. Have you not been paying attention to anything that’s been going on around you?

You seem determined to pass the “you deserve it” spending rationalization on to your children. Hard work is great and brings its own reward. Piling on debt is not a reward for anyone. That is not the kind of personal finance legacy that you should be leaving your children. It is a first-rate debt creator.

So thanks to Dean H. – a fool of finance – for bringing his financial planning ideas to our attention so that we are reminded not to use them ourselves.

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10 Responses to “Fool of Family Finance – Dean H.”
  1. SJ says:

    Hrm… thinking back I wonder how my parents helped me thru college… i.e. where the money came from… I guess short term mutual funds? heh…

    I went to a pretty cheap ugrad, in-state public with some scholarships =). Also 3rd best in the nation for my field =D

    I think I deserved 😉

  2. SJ says:

    Opps, sorry about double posting, but I like the concept…
    Like darwin awards for finances!

  3. The concept is great. The old saying “a fool and his money are soon parted” fits in well with the idea of “fools of finance.” Nothing like real examples to make a point. And, you spank ’em good!

    The bottom line is people can do with their money as they see fit, but it’s great to have an opportunity to judge for ourselves whether their approach seems reasonable or sensible. Most of us can learn from the experience of others, but some of us just have to touch the stove to find out it’s hot.

    I worked my way through college, and it was a good experience. It helped make me more independent and owing to no one. I wouldn’t trade the experience for anything.

    Looking forward to more “tough” insights,


  4. Rick Beagle says:

    I must be an old fart because my only comment to this has to do with the lack of perceived efforts on the part of the ADULT children to defray these costs. I would be more willing to sympathize with his dilemma if there was a sense that these Adults had more “skin in the game”.

    Excellent point on schools btw.

    Rick Beagle

  5. MasterPo says:

    Have to disagree about the schools.

    A lot depends on what the kids want to study and their goals for careers. In many fields the name of the school you go to opens or closes doors. That is the hard, cold truth. A good student will do well anywhere but the reality is name recognition plays a BIG part in many fields. Tell someone you went to MIT or Princeton and it’s a given you went to a good school. Tell someone you went to Hofstra or Adelphi and get the next question “Where is that?”.

  6. Po- That may be true for a small subset of schools but not for most private schools. Also, the real edge comes with scoring that first job out of school. After that, its all about job performance.

  7. SJ says:

    MIT, Princeton — When I was looking @ ugrad they more or less advertised that most the students would be able to get financial aid…

    I’ll speak only from the point of an engr. —
    1. There are a lot of great in-state schools for my major. Michigan, Washington, UIUC, Berkeley, etc…
    2. The ability to get a job isn’t just the name of your school, but also the connections your school as w/ industries. Such as CAT, ge w/ uiuc, LM w/ Lockheed, etc.
    3. If you are that good a student, get a masters. Cap your degree @ a top tier school. As long as your ugrad isn’t Hofstra and lacks research opportunities you should be fine!

  8. TMN says:

    Not defending the guy, but look at the other options. I know several people who have come out of a state school with over 40k in debt, and one guy in particular with over 100k. I’m not saying they’re making the right choices either, but we need a shift in a number of expectations regarding college in this culture.

    While the current expectations stand, though, I can certainly understand wanting to protect your kids from the kind of ridiculous debt that society has basically assumed you will take on.

  9. Snowy Heron says:

    State schools don’t have quite as nice of an appearance as the better private schools, but you are paying for the education, not a great photo op or just to impress the neighbors about the school your kid is attending. I would say that if you have the money to send your kid to private school, go for it. But do NOT get them in debt for such an education. A kid with good initiative will do fine in a state university. Plus, a few years back there was an article I read about the school that more Fortune 500 CEOs had graduated from than any other – and that school was not Harvard, Yale or Stanford. It was the University of Wisconsin.

  10. Both of my kids will go to state schools. You can get a good education anywhere. All you need is a desire to learn. For my oldest, the state school happens to be one of the best for his field. And I agree, once you get that first job, it’s all about performance.

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