How safe is your child from a lifetime of debt?
I’m annoyed. 
It started in 1997 while I was helping art students prepare their portfolios as they were applying to universities.
I was talking with them about how they were going to cover their student loans when they graduated and they looked at me as if I was speaking a foreign language.
Just recently I got in contact with Dale Guiducci, a credit restoration expert and owner of ERA Credit Services in San Diego, to see what he would tell the graduating class of 2014 on the topic of planning for your financial responsibilities.
“The things you learn as a youth become the facts of your life as an adult,” he began, “And so, it’s really shocking to see how parents are teaching their children that it’s OK to live on credit without having any real plans on paying it back.”
But it’s not just parents who are doing this
“Schools, the companies that make money off of student loans, and credit card companies all market to young people, giving them a comfort level that this is what they are expected to do… which is go deep into debt to get and education.”
I know how that feels.
When I went off to college, I knew the jaws of debt were closing around me.
In fact, my first year cost me more than all of my previous education combined.
But not only was it expensive. Most of the classes were purely learning for learning’s sake. I knew they weren’t giving me the skills I needed to help me pay my way in the future.
So I fully agree when Mr. Guiducci tells teenagers today, “If you can’t afford to go to the University you would like to go to, go to the University you can afford. Or, delay going. Work for a year or two and save some money to help pay the tuition.”
“There’s no guarantee that the jobs are going to be there for a lot of majors in 4 years. And even if they are, the percentage of graduates who either decide they don’t like their major, or can’t find jobs in those fields is sky high.”
“And so, after graduation, most of them end up in low-paid entry-level jobs strapped with a massive student loan and credit card debt.”
And yet parents still feel it’s their duty to make sure they put their kids in this financial position.
That right there shows you how institutionalized this line of thinking has become.
But ask yourself: Don’t you think there are better ways to give someone an education with $100,000?
Here’s one example. In my last issue I highlighted the story of Mike Reifeiss, the man who started “All-in-limo” with the earnings from one successful night at the blackjack table. With hard work and determination, he now owns a stretch Lincoln town car, a stretch Humvee and a brand new $60,000 party bus. That beats a degree in English Lit. any day.
But parents are still mortgaging the next 10 years of their children’s credit history by sending them off to schools they can’t afford and wishing them, “Good Luck!”
As Mr. Reifeiss’s example shows, they might do better just to send their kids off to Vegas for 4 years.
Think about what you’re really teaching…
You know the way the job market was when you graduated from college? Forget that.
Things are completely different now. The cost of college, right along with the cost of living, has gone up and up and up while wages have barely kept up with inflation.
When you add how much computers have maximized efficiency, meaning less jobs to go around, and how much the population has grown, it’s clear to see – the job market is a lot tougher than it was when you graduated from school.
In fact, I can’t think of anyone who graduates now days with a 4-year degree and expects to go straight to work for a major company specializing in that field.
That would be like someone whose spent the last 4 years partying and hanging out with friends to suddenly receive a job offer at Anheuser-Busch just because they “know a lot about beer.”
No, that’s not going to happen. You’ve got to work your way up in the world, as you know. And the key to doing that successfully is being able to use your money strategically.
If we teach our children that they can live on credit for years on end, study something that won’t lead to a profession (and may even keep them away from learning valuable real world job skills), then don’t be surprised when living in debt becomes a way of life.
Strategy…
Success as an adult depends on making smart decisions with your money.
Your children have dreams. That’s why they need you to help them find out what those dreams are and, together, figure out the strategy they need to get there.
That’s how dreams become reality.
So, what are is first step in planning for their futures?
They’re the skills you use every day to manage your own finances.
Things like:
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Religiously paying your bills on time
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Only buying things you know you can pay off (this includes university)
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And building up an emergency savings fund
It’s not rocket science but you’d be surprised of how many Americans fail to follow these 3 simple steps.
You’ve learned from your mistakes…
You may be able to send your children to school but will they be able to handle the financial responsibility that goes along with it? If the answer is ‘questionable’, now is the time to get a little clarity in the situation – for everyone’s sake.
Let’s say your son or daughter is thinking about being an artist, just like I was when I was young, I say make sure they have the end goal in mind first.
Ask them: What kind of artist?
Maybe they want to be the next Picasso.
It wouldn’t hurt, then, to figure out what kind of opportunities there are for an artist like that today.
It won’t crush their dreams if you can’t find any openings for cubism in the 21st century…
The truth is there probably aren’t many, and for good reason.
But, by helping them do the real world work of defining opportunities before sending them off into the world, you’re showing them how to plan for their future – and that can give anyone an advantage, in any field.
With their dream mind, help them to start building a strategy… and help them to start questioning their original goals and assumptions.
Is Picasso’s style what I really love or is it the fact that he did something big? Is that same style still big today? And if not, how can I do something big – in my own way – to get that same level of success?
Yes, believe it or not, people are still copying Picasso’s 1940’s style in 2014… expecting the same results… without looking at the fact that he was popular, at the time, because the times were different.
However, there is one thing that remains the same.
He was successful because he was master of marketing strategy, bullishly using the perceived value of his fame to beat collectors into submission.
If anything, his style proved that “what you do on the paper” is a lot less important than how you use your position in the world.
Coming back to the topic of education…
And so I’d like to say that what you have on your paper diploma is a also a lot less important than what you are planning to do with it.
Because – if you don’t have a solid, money-smart strategy in mind, before your kids graduate, then it’s highly unlikely they’ll be able to leverage that education for a secure career in the future.
In the worst case scenario, that 4 year piece of paper may only end up showing people that your children know how to “follow directions”, “jump through hoops”… and live in debt.
That’s where dreams go to die.
You have the chance, right now, to make sure that doesn’t happen… and to make sure ‘what they learn in their youth’ becomes the solid foundation they need for a successful future.
So how can you teach your children to think strategically about their money and their futures without “teaching” them?
I’ll get to that in next month’s newsletter when I also show you how you can use those same principals to prepare for your own retirement.
Until then, keep reminding yourself – there’s always a better way… if we’re willing to work for it.
– Jeremiah
Also see my posts on:
The 5 core values that have created the best ranked place to work in San Diego for 7 years in a row.
The simple key to creating a successful mastermind group
Advice from the Mayor of Coronado on giving your child a future in elected office.
