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"Could giving an 18 year old $200k be a better investment than college?"
It all depends on the major and course of study. Giving an 18 year-old two cents and having them forgo college would be a better investment than majoring in one of the numerous worthless degree tracks that colleges offer today. But if we are talking about majors that actually have demand in the job market like engineering, computer science, accounting, and applied mathematics, then no, going to college would be better than handing an 18 year-old $200K without a doubt.
My boys 18 went to navy. came out Hade school paid for, but what they learned in 6 years they now make $100000 and not in debt. The one boy had visited 35 different countries he also grow up.
My boys 18 went to navy. came out Hade school paid for, but what they learned in 6 years they now make $100000 and not in debt. The one boy had visited 35 different countries he also grow up.
The majority of students today who are incurring significant debt through school while pursuing one of the many worthless degree tracks offered by colleges and universities in the current higher education market would be much better off either going the military or trade school route.
This crazy method requires virtually no unique skills...just a basic understanding of finances.
And yes...a $200k investment from parents. Perhaps in a trust so the child can’t touch it for a certain amount of time.
I would submit that by age 25-30 an intelligent young person with a little guidance could have a net worth of $500,000+ and no debt. This could essentially make them self sustaining for life...and rich by 40-50 if they hold on to a few basic principles. The person would also be young enough to still attend college if they so choose.
And let’s face it, who’s the same person at 25 as they are at 18? By 25 most people will have a much better understanding of who they are and where their interest lie.
For a young person that lives at home (or on the cheap with roommates), $200k + contributing $15k+/year of their own money + no debt could pay huge dividends long term. Not to mention the life skills accumulated through being in the working world and understanding exactly how to manage finances.
Look at all the people out here who are 30 with a negative net worth (a worst case scenario for any child of mine). Most will probably be 55+ before they can even imagine what $500k looks like.
For this to work you need a very level headed and practical child that is capable of doing more than working for minimum wage. Something like HVAC, plumbing or good car salesman would be perfect.
You are basically front loading a good understanding of finances/modesty which long term could be way more valuable than college.
If your child succeeds by coming out on the other end with $500k + no debt....well, they will have earned their PHD and most likely have a long comfy life ahead of themselves. They won’t be working a job they hate...they’ll have plenty of time for family/kids...plenty of time to take care of their mind/body, etc.
I guess the most valuable lesson would be how they’ll have to quickly learn the value of a dollar to reach $500k. Once THIS lesson is instilled in a person - money becomes ‘one less thing’ as Forest Gump would say.
LOL!!! How do you figure that a kid will have 15k to put away each year? That’s hilarious.
You’re telling me challenging a kid to accumulate $150-200k by 25 isn’t teaching finance? LOL. What it takes to save that amount at a young age pretty much weeds out a “gimme more so I can spend it” attitude. If your child blows all their money on trinkets than you aren’t teaching them right. Heck, I have every birthday/Christmas card from about 8-9 years old with the money still in them...yes, bad investment but at this point it’s symbolic of my PhD in early retirement.
You don’t need college to learn finance...assuming the parents have any common sense. Granted, common sense may be a rare thing considering how many people basically have a negative net worth. Umm, spend less than you make! Children will often pick up spending habits from their parents...and the degree to which they value material possessions. Get your child used to having a substantial amount of growing money they don’t spend under any circumstances. Make sure NOT to foster a keeping up with the Joneses attitude.
BTW - college is still on the table...just at a slightly older age where finances are taken care of and the kid has had plenty of time to figure out what they want to do in life.
I've personally seen it tried (kids getting trust accounts) many times, and I've yet to see things work out the way you describe. A decent formal education that leaves the child with some educational debt (so that they learn how to pay it off, and don't assume they're owed college) as well as a degree that removes barriers to entry to the working world is much more effective than what you're proposing. Yes, you can learn about finance without a formal education. I could also learn how to drive by trial and error, instead of having someone experienced teach me. That wouldn't make it the smartest way to learn. Just because you CAN do something doesn't make it the most effective method.
Common sense IS rare. Common sense says that handing an 18 year old $200k is a poor idea, but here we are. With respect, why did you start this thread if you're just going to argue with anyone who disagree with you?
It might last them until you die and they inherit the rest. More likely it would be gone in 2 years. It's generally a mistake to give anyone a lump of money they didn't earn.
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Depends on the kid and environments.
DS always had the ability to see his UGMA (9/11 and the dotcomm recession took the UGMA down by $100,000, just as he was leaving of the most expensive university in the USA, full payers). He saw us struggle with commutes, caring for parents, job loses, etc. He graduated with ~$30,000 in student loan debt which is just about paid off and us with $50,000 with $25,000 to go. He's doing well at 34 even with being unemployed for 6 months.
My parents paid for my education, so they technically faced this decision back when I was 18. I can confirm that, at least in my case, the college tuition was a much better investment.
I now have savings that are many multiples of the cost of my education, and the investment income on my savings which is multiples of the cost of my education (even at a generous 10% return) isn't anywhere near my annual salary.
Said another way, the ROI on my college education was many times higher than the ROI on most other investments, save perhaps for a successful business started with the money. However, the odds of starting a successful business at the age of 18 with no formal education are quite low. Sure, it happens, but failure is the more likely scenario.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Quote:
Originally Posted by NYCresident2014
My parents paid for my education, so they technically faced this decision back when I was 18. I can confirm that, at least in my case, the college tuition was a much better investment.
I now have savings that are many multiples of the cost of my education, and the investment income on my savings which is multiples of the cost of my education (even at a generous 10% return) isn't anywhere near my annual salary.
Said another way, the ROI on my college education was many times higher than the ROI on most other investments, save perhaps for a successful business started with the money. However, the odds of starting a successful business at the age of 18 with no formal education are quite low. Sure, it happens, but failure is the more likely scenario.
And what is your Parent's ROI on their college investment in you? Did you compensate them + ROI? I had a renter who did that for his parents, but didn't know it was common to do so. I think most kid's feel it it their 'entitlement' and don't give a second thought to re-paying with gains to parents. I suppose some parents would refuse it, in which case I would expect their kids 'pass-it-on'. Give the equivalent $$ to a charity or family needing edu$ in the name of their parents.
Don't know, as no one in my family (for last 4 generations) ever got a dime for college (or any other endeavor) from their parents.
I have lived a pretty conservative life (I don't mean politics). I don't spend much money on luxuries, never have. Have never run up much debt, keep my cars a long time, live well below my means - always have.
And yet even I think that giving me $200,000 at age 18 would have been an insanely bad idea.
Few 18 year olds can make half decent decisions about things like "food vs. beer - where should I spend my last $20?" You really think they can make good decisions about a huge pile of money like that?
Not 18 - sometime in their 20s when they’ve proven themselves.
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