Calculating the cost of getting kids to college
The price of growing up
Parents spend a lot on their kids to give them a leg-up. So when do those additional investments in a kid make sense and when do they not? Diane Lim, from the blog Economist Mom, joins us to talk about when spending for kids is worth it. "I am very experienced at spending lots of money on my kids, that's for sure," says Lim, "my overriding philosophy has always been that I want to make available to them the opportunity to try lots of things and to figure out not just what they're good at, but what they like to do." Lim says she's not a parent who has forced her kids to do community service or whatever she thinks would look good on a college application. She has tried to give them a sense of budget constraints -- that they can't do everything financially or time-wise.
So when parents think about spending to get their kids ahead, what mistakes do they make? "There's a tendency for all of us [parents] to just throw money at anything that we think is going to have some small marginal affect on [our kids'] chances to get into a good school," says Lim, "we have a tendency to do a sort of flawed form of cost-benefit analysis. We ask ourselves, 'Is there any chance that this thing that I could pay for would have some small, positive affect on the outcome for my kid?'" The mistake parents make, says Lim, "instead of saying how does that amount of benefit compare to the amount of cost, we just ask ourselves, 'Do I have the money in the bank to afford this?'"
Lim says if parents ignore the cost side of the equation, they could be squeezing something else out of their lives, "the reason why parents have to somehow try to get a grip on the cost side of that equation, that calculation, is because there will be bills coming due every moment. There are future expenses to pay for and it just may not make sense. You may need that money much more to be able to pay for college costs than to get your kid ready with the SAT score to get into the college."
We want to know what you think -- when does spending on your kid pay off? And when does it not? Leave a comment.