Family Series Part 5 – Thoughts on Life After High School

The first 18 years of most children’s lives are fairly well mapped out and uniform, at least here in the United States, from the progression of daycare to elementary school to junior high/middle school to high school. Upon graduation from high school and simultaneously becoming an adult is when paths start to diverge.

Some may choose to continue their education in college, others will start working full-time, many may join the military, while still others may pursue something entirely different like traveling abroad or taking a gap year. These days there are so many options that the world is truly our kids’ oyster!

Although we cannot control what our kids do when they reach this stage of life, we can help influence their decisions and help set them on the right path by planning ahead for whatever their future holds. Some parents are more firm & demanding with a specific vision for their kids while others are more lenient, letting their kid’s own interests & pursuits lead the way.

Where do each of us fall – firm & demanding, lenient, or somewhere in between? Read on to find out…

Scout

For the longest time, in my mind the ONLY path for my kids after high school was attending college. My wife and I were both on the same page, I think primarily because college was the path both of us took. However, in recent years our stance has softened as we’ve been exposed to many more alternate paths through learning about others’ experiences on podcasts or in-person.

What Shaped Our Initial Thoughts on College

Growing up it was as though EVERYONE was supposed to go to college – in fact, there was seemingly no other choice. Back then it was “common knowledge” that 4-year universities (preferably private) were reserved for the most successful, community college was acceptable but still somewhat looked down upon, while only those who were going nowhere in life either skipped college altogether and/or started working full-time immediately.

I heard this message over & over from my parents, from my teachers, and seemingly from (American) society at large. Looking back, I’m not sure how much of this message was literally preached, was just inferred by me, or was simply a byproduct of the time period (1980s/1990s) or place (Pacific Northwest) that I grew up.

Whatever the cause, my wife & I both believed this message wholeheartedly and ended up going to college ourselves. So of course, when we had kids of our own and started thinking about their future, our default was to plan for a future that included college.

Our College Planning

Putting our plan into action included choosing the right type of savings/investment vehicle for future college expenses, figuring out how much to save in each child’s account, and also the logistics of how often we wanted to fund these accounts.

While there are many types of college savings accounts, the three primary options are 529 plans, Coverdell Education Savings Accounts (ESAs), and Uniform Gifts to Minors Act/Uniform Transfers to Minors Act (UGMA/UTMA).

529 plan – A tax-advantaged account designed specifically for education savings. Contributions are not tax deductible, but earnings grow tax-deferred. Withdrawals are tax-free when used for qualified education expenses such as tuition, fees, and room & board. There are no federal limits on 529 contributions.
Coverdell ESA – A type of trust or custodial account that offers a tax-advantaged way to pay for education. As with 529s, contributions are not tax deductible, but earnings grow tax-deferred and withdrawals are also tax-free when used for qualified education expenses. The annual contribution limit is only $2,000 per beneficiary.
UGMA/UTMA – Another type of custodial account that allows parents (and others) to make an irrevocable gift to a minor that can be used for college or any other purpose. Investment earnings are generally taxed at the minor’s tax rate, which is usually lower than a parent’s rate. There are no federal limits on UGMA/UTMA contributions.

After researching these three main choices, along with other ideas (such as using a Roth IRA, savings bonds, prepaid tuition plans, etc), my wife & I settled on using a 529 plan. We preferred the tax-advantaged nature of this type of account along with no restrictions on contribution amounts. In our minds the only downside of a 529 was that withdrawals could only be used for qualifying education expenses in order to avoid a penalty. At the time we were willing to take the chance of over-funding the accounts and having to pay a penalty vs. underfunding and having to make up the difference elsewhere.

We opened a 529 for each of our two kids within the first year they were born. With 18+ years ahead of them until college, we obviously had no idea how much these expenses would turn out to be. Various resources and college savings calculators were all over the map, some predicting future costs to skyrocket (similar to medical expenses), while others predicted more tempered increases. Because the future was so unpredictable we decided at the time that we would aim to contribute $100,000 to each of our kid’s 529 accounts.

Due to the magic of compound interest, we also wanted to fund each account as soon as possible to provide maximum time for growth. Our hope was that at the very minimum our own contributions would have a chance to double at least once, resulting in a balance of ~$200,000 by the time it was needed. Because of this, we started contributing $1000 per month.

The Tides Were Changing

As I had mentioned earlier, in our minds college was the ONLY option for our kids after high school. Anything less would have been considered a failure, not only for our kids, but also for ourselves as parents.

My thinking started to change after I found the FI community back in 2018 and started to get exposed to new ideas and other community members’ actual experiences. Beyond learning about what cool things people were doing such as travel-hacking, taking sabbaticals, etc, there was a lot of discussion about kids, money, and life paths after high school graduation.

Of course college was still an option for many kids, especially those who planned to enter career fields where higher education was absolutely required such as medicine or engineering. There were also many people who took alternate and in many cases,more lucrative paths such as going into the trades, becoming an entrepreneur, etc. Besides strictly education/career-oriented paths, many also chose something unique & memorable such as taking a gap year or traveling abroad (for an extended period of time).

While different stories each included distinct outcomes, most were generally positive. Most people who chose alternate paths besides college ended up doing well later in life, with great stories and memories to boot. Although some may have temporarily stunted their earnings and/or career growth, nonetheless most wouldn’t have traded it for anything else.

These stories really struck a chord because while I wouldn’t change my own life or career trajectory, I also didn’t want my kids to feel forced onto the same path if that’s not what they wanted. My wife started to feel the same way over time as she heard more and more alternate views and paths as well.

Looking Towards the Future

If our kids choose to go to college, we will unashamedly be ecstatic. If they make an alternate choice, we will still be accepting and in almost all cases be supportive. Yes, we want the best for our kids, however with so much time ahead of them after high school graduation, there is still time to course-correct or recover from any mistakes. Our only requirement is that they become productive members of society; just sitting around the house playing video games all day is completely unacceptable.

At the moment, my daughter is quite studious and has an interest in math & science so I can definitely see her pursuing a career in a STEM field and attending college to help achieve this. On the other hand, my son has less interest in this area and more interest in everything but… so we shall see where this leads him. Out of my two kids, his future seems less straightforward and whatever he decides to do may truly test how open my wife & I are to alternative paths besides attending college.

And finally, to tie up loose ends, for those who are wondering how our new views impact our college savings plans… We decided to lower our initial contribution amounts from $100,000 to $50,000 for each of our kid’s 529 accounts. Because we front-loaded these $50,000 contributions though, we are hoping they still grow to $100,000 by the time money is withdrawn. If our kids do end up going to college, perhaps there may be a shortfall but we are willing to either make up that difference from out-of-pocket money or federal student aid.

I am also planning to have my kids apply for scholarships following some of the strategies that Chris Corinthian from FinLit University & PBS “My Money Mentors” lays out such as applying for at least 10x the amount in scholarships required and not being afraid to apply for all sorts of scholarships (beyond just academic ones).

Note: Chris gave an awesome presentation at the 2024 EconoMe Conference about scholarships titled “How to Pay for College Without Student Loans”, which is definitely worth checking out.

The Squire

It is so much fun to watch my 10 year old and 7 year old kids grow up. It’s also very fortunate that my wife and I get along with our kids most of the time. We definitely share our thoughts and insights and even advice that we’ve learned through our lives. However, we make it clear that they will each have a unique journey in life, and they will turn out differently than us. We tell them that we are excited to see what they will learn, what they will become passionate about, and what kind of lives they will lead.

As they get older, they will be able to make more and more decisions, which in turn will send them down their individual paths. As they get into middle school and high school, we plan on letting them make more decisions when it comes to their future. By the end of high school, we hope to side closer toward the ”lenient” parents, letting our children make the bigger decisions about what they do after leaving high school.

My Experience

Before I was even in high school, it was a foregone conclusion that I would go to college after graduation. My parents expected me to try hard in school, enjoy extra-curricular activities, and go to college. It was by no means necessary that I would apply for prestigious colleges, and in fact my parents highly encouraged me to consider getting an Associates Degree at the community college and then transfer to another college. I was definitely not the smartest in my class, but I enjoyed being busy with sports and band, and studied enough to get mostly A’s throughout high school. I applied to several in-state schools, and was able to attend the one I wanted.

Different for my kids?

Although my wife and I will continue to share our thoughts and even advice with our kids, we hope to guide them to be able to become independent adults. This doesn’t mean that we’re kicking them out of the house at 18. It doesn’t mean that they have to pay for everything as soon as high school is over. However, in high school, we do want them to have fun, and also think about their future. And we want to support them with the decisions that they make.

If College is in the Cards

We decided to invest some money in 529 plans for each kid just in case either do end up in college. We’ll see if this turns out to be a good idea. If we don’t end up saving enough, student loans may be an option. If we save too much, there may be a penalty to take the remaining out, but that will be okay.

My guess is that there is more than a 50% chance that both of our kids will end up in college. As they get into high school, I’ll remind them that some jobs require college degrees and some don’t. College made sense for me. I had an opportunity to do the kind of work I enjoyed (and still do) because I went to college. However, there are more paths now, and my kids are different than me. I hope to make that clear, and to make sure they understand different scenarios that can work out great for them.

A Different Choice

There are so many alternatives these days to attending college right out of high school that make a lot of sense to consider. We hope to research these with our kids as we get closer.

Online classes for the right people can help introduce and even go into depth in many subjects. This is a great way to learn about various interests. There are some certifications, self-paced classes, group classes, and even online only college degrees offered online.

If our kids become interested in certain industries, depending on the job, it may make sense to look into apprenticeships or a trade school that is geared to set them up in a position that they can start right away. Going right into a profession they want through other avenues than college means they can do what gets them excited without having to take classes and spend tens or hundreds of thousands of dollars.

I can see a possibility of either or both kids finding jobs they enjoy in high school, and deciding to stick with it, rather than going into college or taking any extra classes. Many times sticking with what you enjoy and getting more experience can be better than taking a break to take unrelated or unnecessary classes.

Many kids want to take a break after high school. If our kids fall into this camp, I think we could figure something out. However, I think this scenario may require a bit more planning, especially if travel is involved.

Funding much of their college or other expenses shortly after graduating high school sounds like a great plan, but there are so many moving parts. Each kid is different and has unique interests, and it may take a little while for them to figure out a path for themselves and decide how to move forward.

We look forward to seeing what our kids choose to do after high school, and we look forward to supporting them in the choices they make.

Links/Resources

Reader Questions

What was your career path after high school? Would you want your kid(s) to follow the exact same path?
What are your thoughts on college vs. other paths? Have your views always been the same or have they changed over time?

Leave your answers or comments below – or email us directly at info@epicfinancialjourney.com