In an article reposted on MSN Money last week from Kiplinger, the authors did a good job discussing some of the various options available to pay for college. However, they mentioned student loans as one of their seven “smart” ways to pay for college. I respectfully disagree. There is nothing smart about student loans. Five reasons follow:
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This week’s posts have been somewhat of a miniseries on work and life skills. I want to wrap up the series by looking at what types of knowledge your child should be learning. There is so much education and knowledge available for consumption on the internet today that it is easy to become overwhelmed with the choices. I’d like to get the discussion started about what’s more important – theory, facts, or skills?
First let’s differentiate fact from theory. Fact is a known, an absolute, such as the answer to a simple arithmetic equation or the first president of the United States. The right answer to a fact is always the same. Theory is somewhat like a fact, it feels like this is a known but it is not always so. It is an explanation or a thought based on observation or testing. The outcome might not happen every time, but through repeated observation it is relatively certain that the theory will be proven a high number of times.
Skills are something quite different. Skills are things that one can do well. Skills can be very tangible and measurable, like making paper airplanes, painting a wall, or throwing a baseball. Skills can also be very subjective and suited to personal taste, such as vocal abilities, presentation delivery, or blog writing.
Education teaches us facts and theory. Practice, repetition, and application teach us skills. Theories and facts can be used in the initial development of our skills but are not always necessary to improve those skills.
I believe that the proper order for these three, from least to most important, is facts, theory, then skill. This also happens to be the order for ease of learning and development as well. One can memorize a fact in under a minute, but often a fact is infrequently used and sometimes gets lost. A theory is a little more difficult to grasp. It might take a more in-depth understanding of various principles and some repetition before a theory takes hold, but when it does a theory sticks around longer in the mind of the learner.
Skills take the longest to develop. One might start out with a skill in a very rudimentary fashion, but as mentioned previously they get better at the skill with repetition and practice. Malcolm Gladwell wrote “Outliers” to document the study of experts and professionals. Gladwell theorized that it takes at least 10,000 hours to become world-class at something. That’s why the professional athlete or concert pianist we all admire is so good at their craft – they put in the time necessary to become the best at it.
So to answer the question, what should your child learn? All of them. Some facts are necessary to get through life, but there are a lot of facts that are drilled in us during our school years that are simply unnecessary. Theories teach us about the world around us, including how things work together and what makes people click. As we go through life, we will learn more and more theories simply based on our life experiences. Skills are how we perform our craft. Repetition and practice help us get better at those skills and being outstanding at our craft is what makes us stand apart from our competition. Apply skills along with the knowledge of the theories that you know and you become an invaluable resource for your employer – you might even find your way into entrepreneurship.
To close out this post, I want to share a resource that I think is a very important read. Seth Godin released a free manifesto this week entitled “Stop Stealing Dreams” on the topic of education. I highly encourage my readers to download and share. Until we change the system, we’ll keep getting the same outcomes.
As part of my final project for my master’s degree, which I will receive in May, my team of three is writing a research paper on artificial intelligence. You might be familiar with IBM’s Watson, a super-computer that defeated Brad Rutter and Ken Jennings on the Jeopardy! Challenge in 2011. That event has raised a lot of questions and concern about whether computers will replace humans. I believe the answer to that question is “it depends” and in this post I’ll explore what that means.
Computers can only do so much. They are very good at computational speed, they can sort through large quantities of data very quickly, and the search capabilities are improving daily. Applied with robotics, many factories have become automated and thus have significantly impacted the availability of assembly line jobs through the use of computers.
Computers, however, only do the things that they are programmed to do. If we aren’t careful, we humans can get caught in the loop of doing only the things that we’re programmed to do. When we get comfortable in the day-to-day routine of the job and allow our skills to be limited to a number of repetitious tasks, we run the risk of being displaced by automation.
You might think of Watson as a totally new threat, and that your job is now at risk because a computer now can answer questions like a human. Progress will continue; Watson is being used with WellPoint in a new healthcare initiative so further developments on the technology in different industries is inevitable. And others will follow with breakthroughs and innovations of their own around artificial intelligence and intelligence augmentation, so the line between human and computer will continue to get more narrow.
However, regardless of haw advanced computer systems might get, there are some areas where they will always be challenged. For starters, computers have no emotion or feeling. They cannot sympathize or relate to others. They know how to do work that is presented to them but cannot start work. They can only solve the problems that they are programmed to solve. They cannot laugh, cry, give hugs, inspire, lead, or do other things that are uniquely human.
If you take even a subset of these or many others and develop those skills to be world-class, then there is no limit to what you can accomplish and no chance of being replaced by a computer. Providing inspiration and motivation in leading others is constantly in demand. Taking the initiative to make things better, solve a problem, or prevent one from happening is a lost art because it seems that most everyone is afraid to take a risk. The internet has managed to make the world smaller but it has also pushed us into isolation behind our faceless identities on email, text, Facebook and Twitter so we are all starved for human interaction. The world is craving those who can build and maintain trusting relationships and demonstrate genuine care and concern for others. Sounds a lot like the post on emotional quotient that I posted last week.
Notice that none of these skills require technology or advanced education. One might be aided through the application of technology as a tool, just as I’m aided by this computer to write this blog. Left to itself, the computer won’t generate one word of content, nor will any other technology replace the skills that are mentioned above. But, as with any tool, those who are able to use the tool to its fullest advantage will reap the most benefit from the tool. The skills mentioned above are the complementary strengths to a computer’s weakness. Someone who posesses these skills and the talent to use the tools – now there’s a person who will change the world.
Are you in danger of being replaced by automation because you lack these skills? Have you been “programmed” into repetition? What are you doing to identify and enhance these skills in yourself, or in your team? How are we equipping the next generation to leverage these skills?
That’s a strong statement – IQ, or Intelligence Quotient, doesn’t matter. But we all know people who are brilliant, maybe even absolute geniuses, who don’t have enough common sense to come in out of the rain. This post will look at several questions, including:
- Does education improve your IQ?
- Does your IQ level equate to success?
- Can a high IQ be a distraction?
- If IQ is not important, what does matter instead?
First of all, can education improve your IQ? Absolutely. This doesn’t necessarily mean formal education in school, but a general exposure to educational topics and exercises will improve your cognitive ability. On a typical IQ test there are several questions related to math, words and reading, logic, and reasoning. By being exposed to a variety of problems, reading, challenging your mind, and so forth, your brain gets a workout. Just like your muscles, the more your brain is put to the test the better it will perform.
Does your IQ level equate to success? This is a tricky one – success has many different connotations. Let’s say that success means a good job with a good income. In these terms, IQ is no indicator or predictor of success at work. What about success in the classroom? Those with a higher IQ have better tools to succeed in the classroom, but just like the raw talent that any person might have in another area of their life that talent has to be put to use. In The Millionaire Mind, author Tom Stanley writes that test scores and IQ have very little to do with financial success.
Can a high IQ be a handicap or a distraction? That depends on the person possessing the high IQ. If a person decides that they don’t need to do the hard work or that they understand because their IQ is that much higher than others, they may find themselves quickly falling behind in school or at work. IQ is a test of general intellect, not of a specific subject matter. One with a high IQ may also be less open to solutions or possibilities other than ones that they have formulated simply because they feel that they have a superior intellect. So, a person with a high IQ might have interpersonal issues that they have to deal with which impedes their success at work, in school, and in relationships.
Which leads me to my final question – if IQ is not important, what matters instead? It is a factor known as Emotional Intelligence, Emotional Quotient, or EQ. Quite simply put, EQ is a measure of a person’s ability to relate with others, with themselves, and with the world around them. Components such as relationship and social awareness, adaptability and stress management, overall mood, and general awareness of one’s own feelings are essential to EQ.
In an upcoming post I’ll take a look at a classic book that describes ways you can improve your EQ. In the meantime, please chime in with your thoughts on IQ and EQ. Which one do you possess more of and where do you struggle? How does either impact your work or personal life? What are you doing to improve where you have challenges?
Back in October, President Obama announced The American Graduation Initiative, which you can find on the American Association of Community Colleges website. As part of this announcement, he set some lofty goals, one of which is that America will again lead the world in the percentage of college graduates by 2020. To meet that goal, he has called for 5 million additional community college degrees and certificates to be awarded in that time. One of the statements made by Obama at Macomb Community College in Michigan was that he wants every American to commit to at least one year or more of college education or career training in support of this goal. The word that stands out to me is “commit” – does this go against one of our rights to freedom of choice as citizens of this great country? Is the President within his rights to ask for this level of commitment from the citizens? More importantly, is this the best thing for the young people of this nation?
I’ll steer clear from the first two questions. All I’ll say about those is that the shifts in American society over the past 50 years or so have done more to erode our basic rights and freedoms than at any other time in history. Regarding how this might benefit the high school graduates of this country, I believe that it is a mixed bag. The basic premise of college and career education is sound. There are skills and principles that are taught after high school which may not be appropriate for younger students, or which they may not be ready for given their level of maturity. Even when your children land the “big job” their education and training won’t end, so learning and continual improvement is a good habit to develop in them and in ourselves.
The Affluent Student is all about developing great students, but we’re also about developing good, solid people who know how to relate to others and do work that they love. Not everyone is a fit for college. Maybe your child wants to go to the military, or even serve in the Peace Corps or on the mission field. There are times when an apprenticeship program is more appropriate, and sometimes it’s just better for someone to go out and get a job. In fact, I’ll even say that if your eighteen year-old doesn’t know what they want to do with their life, then that’s OK and it should be fine for them to coast around in various jobs for awhile. The experience of life will do more to train this type of person than any amount of time they spend in class. To send someone like that right back into the classroom would be a waste of their time, and likely would create a lifelong distaste for learning.
People in all walks of life need to keep learning. The world around us is simply moving and changing too fast for us to believe that we can learn everything we will ever need to know by the age of eighteen. However, the formal classroom setting doesn’t have to be that vehicle, and the government should not be in the business of telling us that it is. And education does not automatically lead to success – the application of education and knowledge is the catalyst to success.
One of the common themes that is floating around the Occupy Wall Street camps is that folks feel like they’ve done the right things but haven’t been rewarded for doing so, especially as it relates to college education. The common feeling has been that if you go to college and get a degree then you’ll always have a job, regardless of the degree that you may have. There are some indicators that this is still true. Today (September 2011) unemployment hovers around 9.1% and has been in the same range for the past 2.5 years. But if you have completed your four-year degree or higher, the unemployment rate is 4.2%, down from 4.5% a year ago. Even across ethnic and gender lines, the same thing holds true; those with the lowest unemployment rate are those who have attained their bachelor’s degree or higher.
This seems to indicate that you major doesn’t matter. I don’t think anything could be further from the truth. When going to college, you must choose a major wisely. Although employers don’t really care where you went to school they do care what you learned while you were there, and the best indicator of that is your choice of major. You also want to choose your major based on where you think your passion and calling aligns best, what jobs and careers are fed from your field of study, and whether your personality is suited for these jobs and careers. You really need to be able to answer the question “What do you want to be when you grow up?” before choosing a major. Going into college without a plan is a recipe for a long stay and a lot of debt. Relating my story, I started as an electrical engineering major. When I didn’t do so well in physics and calculus, I switched over to computer science. Although that major has served me well in my industry, I landed here by default because I did not have a cohesive plan.
I also believe that if you are going to school to spend tens of thousands of dollars on an education, then you should view this as an investment. You should choose a major that is worth your educational investment. In 2010, the median weekly earnings in America was $782, or $40,664 annually. If your educational pursuits are not going to yield a job that pays at least 25% more than that, then I recommend taking a hard look at your choices, either of major or of college altogether. You can find some of this information by researching the Department of Labor or the Occupational Employment Statistics at the Bureau of Labor and Statistics website.
I believe that you attend college for one of two reasons – it is either a means to gain the credentials needed to reach your employment goal, or it is an educational pursuit for the simple joy of learning something new. If you are considering college for the second reason, I believe there are other avenues and alternatives for learning today that don’t require the classroom time nor the tuition, books, fees, and other associated expenses of college. The internet makes these alternatives available at your fingertips. We’ll look at some of those alternatives in an upcoming post.
I do fully believe that college is the single-best investment one can make in themselves regarding their lifelong earnings potential. However, like any other investment, you should consider all aspects and choose carefully. Perhaps the single most important aspect in this process if your choice of major. If you plan to work for someone else, many majors can lead to lucrative careers, while others have little value in the marketplace. Choose something that you’ll be proud of, that will lead to a job you’ll be happy with, and where you will be able to earn a great living.
The last couple of posts we have focused on the two tax-favored accounts, the 529 plan and the Educational Savings Account. Today we’ll look at other alternatives. One that some planners talk about is the Roth IRA. Both the ESA and the 529 plan work like the Roth; you make non-deductible contributions to each type of account, and if used for their designated purposes then the earnings are tax-free.
The Roth, although designed for retirement savings, can be used for college also as long as the earnings remain untouched. An individual can save up to $5,000 per year in a Roth IRA, so both parents of a child can save up to $10,000 per year in their Roth account. If the parents have no other college savings but decide that they want to pay for college, then these contributions can be withdrawn without tax and without penalty for that purpose. As long as the parents don’t touch the earnings inside of their Roth, then they would fit this scenario. This can also be part of an intentional plan for college, particularly if you are unsure whether you want to pay for college or not. If your child earns scholarships or does not go to college, then you have this money still working for you as retirement savings. But this should be used as a last resort, in my opinion, because it is more important for you as an adult to save for your retirement than for college for your child. The more money you take out for college, the less you have working for you to earn money for retirement. Another consideration for using the Roth is when you apply for federal student aid. Money that is in the parents retirement savings accounts do not count as assets under the current formula for determining student financial need.
Another way to save for college is through a regular mutual fund, money market, CD or savings account. You do not get the advantage of tax-free growth in these accounts, but what you do retain is full control of the account and discretion to do what you want with the money whenever you want to use it. Again, if you are unsure of your child’s college future or your willingness to pay for school, then this can be an excellent vehicle to put money aside which can be accessed for school. However, unlike the Roth option this money is fully counted as assets in the federal financial aid calculations.
So, with all of these choices, what is the best way to go? Here is a list that you might use to help you make the best decision:
- Evaluate the cost of college using the college savings spreadsheet.
- Decide if you are saving for college for your child. If not, that is OK but be sure to have open discussions on a regular basis with your child.
- If you are saving for college, are you financially ready to do so? Are you debt-free except for the mortgage, do you have an emergency fund, and are you saving for college? If not, get there first. It is more important to take care of yourself first.
- Once you are financially ready, and you have decided you do want to save for college, do you want to retain ownership of some or all of the college savings? If so, explore the options of regular savings or Roth IRAs as alternative options to retain ownership and discretion over your savings.
- Do you want a nearly-guaranteed account that pays just tuition and fees? If so, is there a 529 prepaid tuition plan in your state and is it in good financial shape? If so, is your child young enough to open an account? If the answers to all of these are yes, then open a 529 prepaid tuition account in your state.
- If you are creating dedicated college savings, look at your household income. If it is below the thresholds for ESA requirements, begin by saving up to $2,000 per year in an ESA. If that is enough based on your projections from step 1, continue to fund that yearly and monitor performance.
- If your income exceeds ESA limits, or if the ESA savings will not reach your college savings goals, save in a 529 plan up to the maximum allowable based on what you calculated in step 1. If the contributions to the 529 (and ESA if part of your plan) will meet your goal as calculated in step 1, continue to fund that yearly and monitor performance.
Whatever your stance on saving for college, it is extremely important for you and your child to understand the costs of college and the savings vehicles available to you.
Our goal at Affluent Student is to teach you how to prepare your child to excel academically and put them in the best position to earn scholarship money. We do this by giving you tactics to build parent-teacher-student relationships, to capitalize on your child’s strengths, to make learning fun by playing to your child’s learning style, and other tips to help your child succeed. We also teach you about the college and scholarship application process, what things colleges look for, how to find scholarships and apply for them, how to make an informed college choice, and what your child can expect to pay for college. Sometimes, though, your child may still come up short when it’s time to go to college. Or you may simply choose to save for college anyway just in case your child needs it. In the next three blog posts (including this one), we’ll look at saving for college. We’ll explore the basics, review the various savings vehicles and help you decide how much you need to save to help your child get through college debt-free.
Let’s address the basics first – college savings should not jeopardize your own livelihood. I recommend that parents not do any college savings until they are out of debt, except for their home, and they have an emergency fund and are saving regularly for retirement. These last two are extremely important because you don’t want to dip into college savings to pay for an emergency, and nobody is saving for your retirement besides you (and there are no “retirement” loans like there are student loans). This is consistent with Dave Ramsey’s plan where college savings takes place at baby step 5. You also may simply choose not to pay for college which is alright with me. Many parents feel that college is a luxury and not a necessity, with which I agree. They may also believe that if a child pays for college then they are more likely to take it seriously and do what it takes to finish. Whatever your reason, if you don’t want to pay for college then that is a personal choice from family to family.
If you do choose to save for college, I recommend that you get an idea of how much to save by visiting my previous post on calculating college savings. You might also choose to save for only a portion of college so don’t feel like you have to save for the full amount that is calculated on the spreadsheet. Once you know how much you plan to save, you have both tax-advantaged and regular savings options. One question you might ask is why would you ever use regular savings for college when tax-favored options are available? There are a few reasons why. First of all, when you utilize one of the tax-favored plans, it is just like a retirement account. That means if you use it for any reason other than college then you will lose the tax advantages and in some cases you’ll pay a penalty on top of the taxes. Second, you might like to keep control and flexibility over the account. If you save for a child’s college and they decide not to go to school, you’ll be penalized if the money is in a tax-advantaged account. If your child gets a full ride and all of their college is paid for, you don’t have the option of giving it to them as a gift without paying the penalties and tax consequences. Finally, some of the tax-favored accounts have income limits and you may not qualify to save for college using those accounts. However, a regular account will be taxed along the way so you have to weigh whether or not a taxable account is a better option for you.
The tax-advantaged plans currently available for college savings are the 529 plan and the Coverdell, or Educational Savings Account (ESA). In the next blog post, we’ll look in detail at the 529 plan, how it works, what its limitations are, and when you might choose it as an option for college savings.
As much as I’d like to give you a the magic formula to what works, this and other blog posts is a collection of things that have worked for us and what has worked for others. Motivation comes from within. How, then, do you get a child excited about school when they just don’t seem to care? When you know that your teenager is perfectly capable of doing the assignments in class but just won’t? When you know that your middle schooler put that homework in their backpack because you saw it there and somehow it didn’t make it to the teacher? When your third grader just refuses to read although the book is easy and you’ve heard them read much harder things in their life?
Motivation that we attempt to create in our child or someone else is known as extrinsic motivation. That is, it is externally provided. That sort of motivation is hard to sustain. For one thing, as in the middle schooler or teenager examples above, you’re not there at school to provide the motivation. And the promise of reward doesn’t always work either. The most effective rewards and consequences are the ones that happen immediately, but again you can’t always be there to provide that immediate feedback especially when it comes to school. We have to find a way to make learning and success a driving component of your child’s personality. Until we can do that, it will be very difficult to sustain long-term success.
If extrinsic motivation is ineffective, how do we create intrinsic motivation? For one, learning has to be fun for your child. Sometimes they won’t have the most exciting and dynamic teacher but you can help at home. Look at their learning environment at home and see what you can do to make it as comfortable and conducive to learning as possible. Make every attempt to understand their learning styles. Ask them to evaluate their own work. Don’t always jump in to correct their work and never criticize their efforts. If you’re asked, go ahead and assist them with whatever they are struggling with but resist the temptation to do their work for them. Certainly don’t use additional homework, reading, or homemade assignments as punishment (remember writing sentences as a kid?). Because these activities are either exactly or closely tied to what they do in school, the very nature of using them as a punishment will affect your child’s motivation to do these activities in school. Leave time for unstructured play so that your child can exercise and explore their creative, imaginative side. Give your child some activities that challenge their mind and stretches them beyond what you know their abilities to be. It will exercise the critical thinking and problem-solving part of their minds and likely motivate them to complete a challenge. Make sure that these are age-appropriate so that you don’t introduce frustration through what they feel is an impossible task.
At some point your child should come to understand the impact of their grades and the benefits of excelling in school. However, prior to middle school your child won’t understand the long-term implications of their school performance, so save the speeches until then. Even then, have this discussion as a talk with your child rather than as a lecture. Engage them in adult conversation by asking questions rather than talking at them. Remember that we want to use middle school as a dry run for high school, so it may take them some time to “get it” and begin to succeed because they are internally driven.
Don’t rush motivation. Be patient and let your child be a kid. What motivates one to success or action varies from person to person, and this goes for your child as well.
Should you send your child to a private school? In general, the reasons that parents give for sending their children to private school are academic, safety, or religious. Let’s take a look at each of these and see if the benefit is there.
There is an overall perception that private schools are just better academically than public schools. This isn’t necessarily the case. Many people fall into the trap, particularly with education, that if they pay more then they must be getting a higher quality education. There are public schools that are fantastic even in problem-riddled school districts. There are also schools which underperform academically; this may be changing soon but if your school falls below the adequate yearly progress measures and your child has a transfer option due to No Child Left Behind, please explore that option also because it will always be cheaper than private school. When considering a public school, you should push them on the hard questions like the following, and compare these answers to the annual reports from your public schools in your zone:
- What was the average ACT/SAT score of last year’s senior class?
- What is your dropout rate?
- What was the average scholarship award for your senior class last year?
- What percentage of your graduates move on to college?
- What is the AP or CLEP success rate of your students?
- What curriculum do you follow and how does it differ from the public schools?
- What are your teacher’s minimum credentials?
- What are the admission requirements? Is admission competitive?
- Can you give me five reference parents to talk to?
- Can I spend a day at the school sampling classes and teachers that my child will experience?
- What is your accreditation status and when does it expire?
- Tell me about some notable graduates.
Next, let’s discuss safety. This is paramount; if your local public school has drug or violence problems, then by all means your child should not attend there. However, be sure that you qualify what it means for a school to have problems in this area. The fact that there are metal detectors and police presence in the school may just indicate that the school is in a rough neighborhood and that they are taking practical measures to protect your children. If statistics (not hearsay) of these type of incidents in the school lead you to the conclusion that your child needs to go elsewhere, then maybe private schools are warranted. Make sure, though, that you consider your own situation regarding your residence. If you live in an unsafe neighborhood, then maybe moving to a better neighborhood is a more reasonable option.
On the religious front, just because a school has a religious name, is housed in a church, or is run by a catholic order doesn’t mean that those values permeate the school. There are good kids and bad kids everywhere, so don’t be naïve that your child will be immune to the things you fear most from public schools. A religious curriculum, opening devotional, prayer in school or Bible study each day are good, but these things do not protect your child from exposure to bad things and bad people. It is ultimately your job to teach your child a values, ethics, and moral code and help them stick to it; a school cannot do this for you no matter how much you pay for it.
One last thing to consider is the financial aspect. Private schools are expensive; on the low end these schools can cost $3,000 per student per year, plus books, uniforms, transportation, and so forth. In tuition alone, that is an extra $250 per month for one child. And, until school vouchers become a reality, homeowners still bear the burden of property taxes to pay for their local public school. This means that you’re paying for the local public school but seeing no benefit from it, and you’re paying extra to send your child elsewhere. If your reasons are academic or safety, why not move instead? Doing so likely puts you into a better, more desirable neighborhood around others of similar beliefs and values. Don’t pillage your savings or put your family’s livelihood at risk just for a private school experience.
Ultimately each parent has to decide if private school is right for their children. There are times where it will make sense financially, but most of the time I believe it does not. My wife and I are both products of public schools, as is my son who earned so many scholarships a couple of years ago. In the end, where you go to school doesn’t matter; it’s all about what you learned while you were there. What is your opinion?
