Why make kids save for college (or not)?

Here’s the scenario. Parents say to their kids, “You are going to receive some money but you can’t use it now. This money is for something in the future. You are too young to really understand what that something is, but you have put money away for it.”

In this case, that something is college. When parents require their kids to put money in a college saving fund, what does the child learn about money management? From the child’s viewpoint, the very idea of going to college is so far in the future that most kids can’t comprehend what that might mean.

Kids understand time based on their own experience. As they get older they recognize longer time frames, such as next (week, month, Christmas, Halloween). These are realistic benchmarks. Next week does arrive. The next holiday does arrive.

What helps kids anticipate future events is the mental picture they have developed because of their experience with past event. Kids can remember the movie from last week, the birthday party from last month, or last Christmas.

When parents have their kids put money in a college savings account, the child realizes that he never owned the money. The money was re-assigned by the parents and disappeared from the kid’s mental picture of his money.

Sure, parents and child will look at that balance occasionally to see how much is in the college fund. But to a kid this money still doesn’t really exist because it is locked away for some fuzzy, future event.

Suppose your child has saved $500 in that college account. Your kid is thinking, “Wow, that’s a lot of money.” In reality, that $500 is a mere drop in the bucket. That entire savings account won’t even pay the first month’s room and board fee.

Rather than have a child save for a distant objective, create a scenario that shortens the time between putting the money away and getting the money out to use it.

Your kid wants to buy a new bicycle and has the option to not spend some of his discretionary money, in effect, “saving” it for the bicycle. His thinking now is, “If I don’t spend today I can have more money later to buy the bicycle.”

This creates a time frame that gives him the ability to see the result (the bicycle) in the future. This reinforces the “saving” thought process through his ability understand the cause and effect of not spending money today.

Money sequestered in a college saving account is ineffective as a learning tool, because the spending activity is too far away. Kids can’t save enough money for college and will be ultimately disappointed to see how quickly it disappears.

In my opinion, kids would gain more now and in the future by putting all their efforts into their school experience. This includes: getting good grades, participating in extracurricular activities, doing community and volunteer work, and developing work skills through summer employment.

College admission boards look for these achievements in potential students. If your child develops an impressive education and experience resume before high school graduation there is a greater chance of success when applying for grants and scholarships.

A record of achievement returns a potential payoff worth many times what the child could save from his or her allowance over 18 years. Good students will always find a way to attend and be successful in college. Sometimes it’s not all about the money.

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