In this episode of Beyond the Paycheck, we are joined Jasper Smith, also known as Mr. Build Wealth, to talk about the complexities of managing financial goals for both parents and children. Our discussion centers on the challenge of saving for our children's college education while also balancing our personal financial aspirations. Jasper emphasizes the importance of considering whether our child truly needs to go to college, highlighting that higher education isn't the only path to success. He encourages us to have candid conversations with our children about their aspirations and to question whether college aligns with their goals. Our dialogue then transitions to exploring various financial tools, such as education-specific accounts and regular investment and savings accounts, that we can utilize to save for our child's future. Jasper emphasizes the significance of early discussions to determine the most suitable solution, with a nod to the SECURE 2.0 act and its implications for saving. Our conversation touches on the option of using funds for alternate purposes if our child chooses not to attend college, illustrating this through anecdotes and suggesting that flexibility and communication are key.
We also delve into the balancing act of financial priorities between education savings and our personal goals, such as retirement and home ownership. We stress the importance of prioritization and decision-making, while considering our individual situations and timeframes. The skyrocketing costs of higher education and the shifting landscape towards trade schools and community colleges are explored as factors affecting the college-versus-trade education decision. The pandemic and its impact on perceptions of formalized education are also discussed. Our discussion continues with reflections on career choices, potential income, and the value of education in various fields, recognizing the need for a solid financial foundation regardless of the chosen path.
Jasper firmly believes in a "village" for financial planning and education. We discuss strategies for harnessing support from family and friends, encouraging them to contribute to financial goals rather than gifting material possessions. Our conversation touches on the delicate balance between providing for our children and instilling a sense of financial responsibility, acknowledging that different households may have distinct approaches.
More from Jasper Smith, "Mr. Build Wealth" and the Build Wealth Movement, here: https://www.thebuildwealthmovement.com/
Find Paula Christine at PaulaChristine.com or via email at paula@paulachristine.com.
Paula: Hi, and welcome to Beyond the Paycheck. I'm Paula Christine. As parents may sometimes find it tough to save money for our kids' college, while also trying to reach our own money goals. Today we are chatting with Jasper Smith, also known as Mr. Build Wealth. He's here to help us figure out how to manage these things. Welcome, Jasper.
Jasper: Hey, Paula, thanks for having me.
Paula: Thanks for joining us. Okay, so before we get and talk about that managing between our goals and the goals for the kids, let's just first start talking about saving for college. What is the most important factors parents should consider when planning for their kids' education?
Jasper: Does their kid need to go to college?
Paula: I agree with that one 100%. Most of them don't.
Jasper: I'm being totally honest here, I've got enough friends who have student loans who didn't really need school and parents were forcing it. I think school is great. College is great but it's not for everybody.
Paula: I agree.
Jasper: I think we've really got to start thinking about, "Does my kid want to go to college?" Because I shouldn't be wasting money.
Paula: When you're saving for college, lots of times they're babies.
Jasper: Sure.
Paula: That's another question. How do you plan for your kid to go to college and then when they don't, what do you do with that money? I know I can think of a lot of things to do with that money.
Jasper: Well, for one, and I feel it really boils down to which solutions you use. They're accounts that are specifically for education, and they just have regular investment and savings accounts. That's a conversation I actually have with a lot of my clients is, is it school? Is it for something else? If they say something else, I pick a certain solution. I think what it boils down to is having the conversation early enough, and then making that decision knowing, "Yes, it's got to be college, or it's not." Or if you're like, "I'm in between." We'll still do a solution based on, "You're not sure so I don't want to have to like handcuff you to a certain solution." Because it does matter what you decide to do. If you can have the conversation early enough, then picking the solution is easier.
Paula: Does the SECURE 2.0 act change that conversation a little bit now that you can take those funds and roll them into a ROT?
Jasper: Absolutely. I for the longest time was a huge fan of the 529 college plan simply because it was all about college. The SECURE 2.0 has changed that but those I think rules don't go into effect until 2024. They're still this period of time, we're like, "Well, what do I do now." For a parent who may be on the fence, just put it in a savings account for now until you can make that decision. At least you're doing something as opposed to nothing. My wife and I had this conversation, my daughter is about 15 months right now and so we don't want college to be the focus for her investment account.
We opened up a UTMA or Uniform Transfers to Minors account. We're only concerned about providing investments for her future, what that future entails, if it's college, great, the money will be there. If his for a trip, great, it'll be there, if it is for a new car. Great. We just wanted to make sure we were investing, but not necessarily having those funds tied to college.
Paula: Okay, but what about investing? If your kid decides not to go to college, you get to keep the money instead of using it for a car or whatever, use it for your own goals.
Jasper: You could. I actually have a mother who did that. Her son opted not to go to school, and she said, "Mommy's going to go on a trip and buy a new car."
Paula: Wow.
Jasper: Seriously. She literally was like, "This served as an investment account." She paid a little bit of taxes on taking the distribution that wasn't for college, she got a new car and went on a trip.
Paula: I like that.
Jasper: The mother said, "I asked my son." She looked him right in the eye and said, "Mommy has been investing for you since you were a little. If you opt not--" He ended up joining the military. Mama got a new car and went on a vacation without him. Yes, that's what happened.
Paula: Well, I know it's a struggle to save for a child's education when you have no idea if they want to go to school, but you got to save for your retirement, you might be saving for a house, you might be saving for something and there's a trade-off there. If I say for my kids, I can't be doing necessarily funding everything I need to do on my own. If they don't go to college, and you got this big pot of money to give to them, I don't know, I struggle with giving it to them.
Jon: I still say Paula, you are way better to have the money and not need it than need the money and not have it.
Paula: I agree.
Jon: Agreed. Well, Paula, let me say this too, to your point, it's all about prioritization. Now, that applies to everybody so we all have competing priorities when it comes to financial planning, unless we just have an infinite amount of income, or we know we're going to receive an inheritance. If we rule some of those factors out, well, we've got to decide if I'm only going to work for another 15 years and let's say I have a newborn child. Well, after 15 years if I really want to retire I need to focus on retirement because last time I checked, there are loans for retirement, you can't take out a loan when you retire. Your child will always be able to take out a loan for education. It's sometimes thinking about well, if I have other priorities, then, yes, my child's education may slide pretty far down the list.
Jon: Yes, that just goes back to everything being so unique to everybody's individual situation. Jasper, do you find that with the skyrocketing cost of higher ed and the lack of skilled trades people that's tipping the scales away from college education for some of these decisions for people?
Jasper: Absolutely. There are more people now who were definitely thinking about the trade school route, the community college route, as opposed to the standard, let's go to the four-year institution. A lot of parents are starting to have that discussion and it's beginning to change. I don't feel like colleges are doomed at this point but I think the pandemic also got people to shift in terms of their thinking of what's really important. Formalized education, I think, is important, education at a university, that's a different conversation. I think about my career as a financial planner, did I need college, probably not, I could have worked for a financial firm got licensed, and learn how to sell at 18, 19, which people have done, and they never went to college. If you do have that mindset of I know what I want to be and if college doesn't fit into that equation, why go?
Paula: There's also a lot of great degrees, that the cost of the education and the salary that you're going to earn, there's no way that you're ever going to pay that loan off.
Jasper: Speak on it. I love my social work and friends and clients.
Paula: That's exactly what I was thinking.
Jasper: I love them all but they do a lot of heart work and they are not compensated accordingly. Even one of my really good friends, she got her master's and then had to log her hours, and I was like, "You still not making a lot of money." It is something that I think to we as a family unit, as friends, we got to have this talk to really make sure that if I'm going to pursue a certain career, then hopefully I have the financial foundation to be able to allow me to still live a quality of life.
I always joke with my friends of what if my daughter grows up and wants to be an actress, and let's say she wants to move to LA go to New York, whatever, it'd be nice for her to have money to pay her rent, pay for food and pay for maybe her car, taking care of the sesame's so my daughter can then not be the "starving artist." She will have some money to be able to provide and live but her job will be literally just to go to auditions. If you go into social work well, yes, you're not going to get paid a hansome sum until the years on into your career. I've also looked at teachers, I mean, teachers across this country are underpaid everywhere.
Paula: I agree with that.
Jasper: The same could be said is, well, what if we had a better foundation starting out as a child, regardless if we went to school but parents just saving invested for their children so when they became an adult, I just think about how many more options they'll have. You don't have to go to school. You don't have to, you don't have to do this, you don't have to do that you can then be mindful of, "Well, here's what I'm really passionate about and I know I'm not going to get paid a lot, but I'll be happy. Oh, by the way, because my parents saved and invested for me, I have a nice little cushion."
Paula: I struggle with that philosophy because I think of how many people because they had to be the starving artist that value money, potentially more, and worked harder for it. Do you see where I'm coming from? I understand-
Jasper: Absolutely.
Paula: -what you're saying but I also see that there's that part that you need to grow and to figure things out, and maybe not necessarily have it handed to you right in the beginning.
Jasper: I totally agree. I agree with both schools of thought. I grew up in a house where I didn't struggle, but I was told about the struggle reminded about the struggle, and also reminded that this wasn't mine. My parents they did a great job of, I'll say in this example, they actually kept me hungry, literally, not that they didn't have the money to do things, but I had to go to work very early, because my parents were like, "You're not just going to lay around and be a freeloader during the summer as a teenager."
I think there's this balance of I think you know your child and so for me, they knew they needed to force me to go to work early so I would be responsible and understanding that, yes, you have some privileges, but we could take those away. Every household is going to be different, I just got lucky that I was the third kid. I think my parents had worked out the kinks with my two older siblings. By the time I was born, they had it worked out, "Here's what we're going to do with baby number three." [laughter]
You understand it is possible to talk to your children to keep them, let's say, hungry and passionate about pursuing something, but also understand that we can still give them a nice little handout when needed. Not when they want it. I think that's a big difference between parents who just give their kids everything and they don't understand hard work. I didn't grow up in the house that way. I knew we had stuff, but I still had to go to work, had to make good grades, I had to do my chores. I think it really comes back to like what's going on in that household in terms of how those kids may come out in the future.
Paula: I agree. As I go through this, I kind of think of the people that I know, I've raised five kids and. Just thinking about their education. A couple of them never made it to college, and they're doing fine and they have no debt. Then my youngest, he kind of struggles. He is finally figured out where he wants to be in life. I do help them when needed. It's hard to know what to do. It's hard to know the right answer is.
Jasper: There's no wrong answer here. I think that's the cool thing about parents and families. There's no right answer. It's like what's right for your situation today? Which we know could change tomorrow. We got to be fluid with, okay, we're going to make some plans, but those plans could change. None of this is in stone. I think if we could just have the conversation more often about our children's future, I think that would help us avoid a lot of stuff later. I think it's from this lack of not having the discussion enough is the reason that people have these issues later in life. Well, I wish my parents would've done this, this, and this. Did your parents, were they aware that they could have done that for you? I was going to mention something too, Paula, around this, whole saving and investing around for kids is, I hear a lot of parents tell me, well, we really can't afford it. It's to your point about those other priorities. I always say this wholeheartedly. People don't ask of their village. They say it takes a village to raise a child, but we're not telling the village what we need. The key word there is need.
Paula: Go into that a little deeper.
Jasper: My daughter's almost 15 months old. My wife and I have paid $0 for clothing. That's shoes, that's shirts, that's Onesies. All we do is, I have friends who have daughters who are slightly older than her and I just make my rounds to pick up clothes because they were all going to give them away. I looked at also, okay, my daughter's going to have a birthday every year. It's going to be Christmas. I have been, you can call it training, I'm training my family and friends to not give us stuff. There was this one stuffed animal, we got five of them. Five all at different times. Every time I got one I was like, I've already seen that toy and we never took it out of the box. I just gave it away.
Paula: Oh, I know. The kids are so much, they get so much.
Jasper: Think about all the money that's spent on children, because I have a little girl. "Oh, Jasper, I thought your daughter will look cute." No. My wife's going to decide what's cute for her to wear. How about you ask me what is it that we need, then you can go buy stuff. Again, how many of us are actually coaching and reminding, and educating our village? Again, these are your family, your friends, your friends who don't have kids who love your kid or kids. There are so many dollars that could help to fund our child's future, but we just don't ask. I'm really living proof of that because my daughter's first birthday, I had multiple people say, Hey Jasper, I know y'all don't want stuff. So where do I send you the money? I said, great. Y'all are listening because we don't need more toys.
Paula: Yes. My granddaughter just had her first birthday and, Oh my God. I said to my son, you almost need to get a second house. Just store all of this. I said this is such a waste of money. Number when she can't play with it all, she'll wear a lot of those clothes once or twice. It's just such a waste would've been so much better just to give cash, and invest it.
Jasper: Here's a good one. This is going to take some time for people to do, when people want to give gifts, you have to remind them to give you gift receipts, and you just got to remind them. Again, we've gotten gifts and I would ask, Hey, by chance, is there a gift receipt? Some people are like, no, we just know she needs this. I was like, you don't know what my kid needs, because you didn't ask me first off.
[laughter]
Jasper: Trade-off. You don't know. Second I did have some friends who got some gifts and they said, Jasper, I've been listening to what you've been talking about. We got the gift receipts, if it's something you don't need or want, you can take it back. One of these was a big six-foot-tall bag of stuff all from Target that we didn't need any of it. You know what I did, y'all? I went to Target, got that money back, and then I went shopping for the house.
Speaker 3: Grocery shopping. Yes?
Paula: That's a great idea, but a lot of people don't listen. I tried that with my kids, especially with the grandparents. I'd Say, "Listen, we're buying for Christmas, you are buying for Christmas. My mom's buying for Christmas. Aunts and uncles are buying for Christmas. They get so much stuff and we don't need it. You know what? They didn't listen.
Speaker 3: Some families won't comply.
Jasper: Families won't comply. Some family members, they're going to do what they want to do, and that's okay. That doesn't stop me from asking. I know it works because my mother-in-law, we had that talk about her buying stuff for her granddaughter and I was like, mama, look, we do need some things, which will always let you know, but we also need money for her investment accounts or savings accounts. What happened is she does both now. I love her for that. I think if there is that segment of people, who just don't want to listen to you, just ask what they consider doing both. I'll take both. We're still going to get rid of the toy if we don't want it, but now we also got money from them. We still get what we want for the child. I think just for those who are just not willing, you got to just keep asking, Hey, would you mind? Hey, would you consider? We'd really appreciate, or the kid, once the kid can start talking, use the child, Hey look, I need money for college and I'm going to do that with my daughter.
Paula: I do that for my grandchildren. I don't buy them gifts. I might buy them a little bit something small, but then I contribute to a 529 Plan for them.
Jasper: Lovely.
Paula: That's what I've been doing for years for my grandchildren. Well, it was great talking with you, Jasper. I love the way that you think and I wish I could have gotten my parents and grandparents to think that way when it came to my children. I'm going to share this a lot with my children about how to ask for money instead of gifts from their family members.
Jasper: Yes. It's a lifelong journey. It's a lifelong journey, but I believe people have the ability to make it happen.
Paula: I do too. It was very nice talking to you. If anybody would like to get ahold of you, how would they reach you?
Jasper: Yes. They can find me at thebuildwealthmovement.com. Again, that's thebuildwealthmovement.com is where you can find me. I have a lot of great resources on my website. If you want to reach out to have a discussion, see how I could be of service, there's a contact us section at the very bottom of the page. Again, that's thebuildwealthmovement.com and if I can be of service, let me know.
Paula: Jasper will be back in a few weeks. he will be talking to us about budgeting. I look forward to that. So if anybody would like to reach out to me, you can contact me at paula@paulachristine.com or check out the website at paulachristine.com. Thanks again, Jasper.
Jasper: Thanks, Paula.