This blog post idea is brought to you by T. Rowe Price, but it is not sponsored. At the annual financial blogger this past week, they gave away little plastic eggs with blog post ideas.
Imagine the poor T. Rowe employee folding hundreds of pieces of paper and stuffing them in hundreds and hundreds of egg. It reminds me of a cartoon character scrubbing a tremendous mountain of potatoes. I would wager that over 97% of them got thrown out without a second glance. I hope that employee sees this and thinks, "It was all worth it!"
Enough introduction. Let's dig in. The full blog post idea was, "Think down payment: Why College is Like Buying a House." I'd like to write an article about why that is so ridiculous, but the more I think about it, the more like it. College and homes may be the two biggest expenses you'll ever have. (Perhaps transportation, food, health care, and even general "retirement" round out other big ones?) College education and houses typically financed over the long term. Both of them tend to fall in the category of good debt.
That are differences though. I'm not an expert at financing college, but I think you can do it with minimal down payment. It may not be easy and there might be some fairly tough loans if you do it that way, but it can be done. Getting a mortgage without a down payment, well, I wish you luck on that. If you are able to pull it off, you have found the black swan of lenders.
Other than the down payment minimums, there is a difference in the timing. Within a small margin of error, I can plan for my sons going to college in 16 and 17 years respectively. Well, let's hope I can. If I don't have the money to buy a home today, there is always three months down the road.
Finally, there's the difference that one is "more optional" than the other. Shelter is a basic need. education is higher up Maslow's hierarchy. That said, you don't need to buy a house to satisfy the shelter requirement.
Going back to the original premise, I really like the idea of saving a "down payment" for college. It feels a lot less overwhelming than trying to save $150,000 or so, plus whatever that inflates to over the next nearly two decades. If you want something even scarier take the number and multiple by the number of children you have and whoa! (assuming you have more than 1) that's a ton of money.
Perhaps if it isn't so overwhelming people will be more apt to do it? Is that too much like behavioral finance?
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