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Reflections on Investments, Financial Education as My Oldest Heads Off to College

Monday, January 08, 2018
mikelarson-150

Last week wasn’t just a holiday week at the Larson household. It marked a family milestone: We dropped my stepson off at college for the first time.

Naturally, we’re apprehensive about some of the challenges we know he’ll face … as well as excited to see what he’ll accomplish in Tallahassee and beyond.

We also know that my daughters (15 and 12) will be ready to leave the “nest” and chart their own courses in life before long, too. That means more bouts of nervousness, joy, fear, happiness, and other assorted emotions await.

But you’re here for financial advice after all. And sure enough, this transition provoked several related thoughts – reflections on investments, financial education, and so much more. Here are just a few …

1. College is expensive. Not exactly a shocking insight, I know. But it’s one thing to read or see stories about the rising cost of tuition, room, and board. It’s another to have to make those payments yourself. Certainly, an education costs a lot more than when I went to college in the 1990s.

So, look at ways to mitigate that. Focus on in-state schools with solid programs. Consider having your child attend community college for two years, then transfer to a four-year university. Take advantage of things like 529 plans, and see if relatives can and will contribute.

If you must, make sacrifices elsewhere. Delay vacations. Put off purchases of big-ticket “wants.” Downsize to a smaller house and use the money to cover costs, considering you won’t need as much space with a child heading off to college anyway.

All of these are possible strategies, depending on your personal financial situation. They may require short-term sacrifices. But they’ll pay off for your kids in the long run.

2. Supplement the (often lousy) financial education your children get (or don’t get) at school with your own lessons and education. Teach them how to manage money as best you can, as early as you can.

Open student bank accounts for your kids when they’re in grade school or middle school. Encourage them to get after-school/summer/weekend jobs in high school. Help them get starter credit cards with low limits when they go off to college.

It’s up to you to decide which solution or solutions work best in your household. But the key is to do something to teach them how to save, budget, and invest before they’re completely on their own.

3. Watch what brands, trends, products, stores, and even smartphone apps your teens and college-age kids are interested in. Listen to what they talk about. See what kinds of apparel, restaurant, and other chains are popular in their college towns.

You’d be amazed what kind of investment insights and ideas you can pick up! Incorporate those on-the-ground, anecdotal observations into your fundamental investment research.

4. Build investment portfolios that are appropriate for each child, and re-adjust them over time depending on their age and grade levels. You don’t want to have a 100% stock portfolio for a son or daughter who’s leaving for college in a year, just like you don’t want a 100% bond portfolio for a child who’s barely out of diapers.

The more time they have until college, the greater the risk you can take on in search of higher returns. After all, a one-or-two-year bear market really hurts when it strikes right before your first tuition payment is due. But you’ll hardly notice if it hits 15 years before then, and your child’s portfolio has more than enough time to recover.

Above all, love … support … encourage … challenge … and when necessary, correct … your adults-in-the-making. I know it’s not exactly investment advice. But it’s some of the best guidance I can give as a parent.

I feel like it was only yesterday that I said goodbye to my own folks on that sidewalk outside my dorm at Boston University. I’m forever grateful for the support they gave me back then, and I hope to do as good a job for my own children now.

Until next time,

Mike

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