Parents, if you choose to help your child with the expense of college, please ensure you minimize the negative impact to your financial future and retirement. There are only 3 ways to pay the college expense. The most common yet least desirable option is to go into debt. We call this person the Debtor. You don’t have the money, so you barrow from someone else and create a future obligation to pay the money back with interest.
The second way to pay for college is to spend down existing assets or just pay with cash flow. We call this person the Saver. The Saver saves the money and when the time comes to pay for college, the cash is used to avoid paying interest. As the Saver is not paying interest, the Saver is also losing interest. When the money is used for college, you can no longer earn any interest on that money… never, ever again.
The third and best way to pay for college is to become The Wealth Creator. The Wealth Creator saves the money just like the Saver. But, when the time comes to pay for college, they use a strategy called collateralization to pay the expense. The Wealth Creator uses their asset as collateral to pay for college. This strategy allows their asset to earn uninterrupted compound interest...forever! This strategy will allow parents to keep significantly more money for their financial future and retirement.
Mom and Dad, there is no need to sacrifice your financial future to help your kids pay for college. How you pay for college will have a dramatic impact on your financial future.