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Skin in the game

Posted: Monday, September 06, 2010

I made a deal with my kids about their college educations. It's very simple: I'll pay half and they'll pay half. How they pay for their share is up to them, but I match every dollar they earn in scholarship, pay for themselves or take out in a loan.

When I tell other parents about this, some of them look at me like I'm Attila the Hun. "Unthinkable" their expressions say. "You would force your kids to pay for something when you can afford it yourself?"

I can live with the furrowed brows because I have good reasons.

I have seen what happens to many young people who take what I call the "Budweiser Scholarship" of a parent-paid education. Often, 18- and 19-year-olds are clueless about what they want to do with their life and $20k-$40k/year is an awfully steep price for discovery. Most people have a greater appreciation for something when they pay for it themselves - they have skin in the game.

I have four children, and each one has responded differently to the challenge.

With my encouragement, my oldest son took a year off to work in the "real world" before beginning his studies. Toiling at a job open to a high school grad convinced him of the value of college. He then worked for a state environmental program that gave him a sizable education grant, which I matched. His grade-point average was higher in college than in high school. He was only too happy to work summers, and when he graduated, he started his career with no college debt.

My second son has worked as a waiter to supplement his education costs and that has made him very selective about how he spends his tuition money. He is focused on creative arts like writing, theater and production. He makes sure every course counts so he will graduate on time.

My daughter took advantage of a program in her senior year that let her graduate from high school with a year's worth of college credit for free. It lets her finish college in three years. That was clever. Since she earned one full year of college credits for free, I matched it by paying for one full year. So now she just has to split the cost of the last two years.

We will see how my youngest son reacts. He is still in high school and living in a virtual reality world that does not yet include much thought about college.

As I share this idea around the country, I find I'm not the only parent who has decided to avoid spending tons of money on unsettled youth with whimsical aspirations and no financial responsibilities.

And the truth is that most people facing retirement years just can't afford to flush multi-thousands of dollars, no matter how much they love their children. Education money must be well spent.

Some parents have told me about a "First Lap" plan where the child pays for freshman year. If that year ends with a decent grade-point average, the parents pay the other three years. Not a bad idea, especially considering how many freshmen select a major not in liberal arts but liberal parties.

With so many kids dawdling though five or six years of undergraduate work, some parents offer bonuses if their children finish early.

Many parents are just frustrated their children don't take much interest in their expensive education if they don't help pay for it. One parent told me that since his children didn't contribute toward college, they didn't feel any urgency to get a job. He wasn't thrilled about having 28-year-olds at home.

With my own family, our journey through college is not yet over. But we have learned that our plan has encouraged our kids to develop a good work ethic, to remain focused on courses that will be valuable to their lives and to be more prepared when they enter college to know why they are there.

Hard-working, focused and prepared. I don't know of a college course that teaches those life skills. Perhaps it is something you can only learn if you have skin in the game.

• Mitch Anthony is the founder and president of the Financial Life Planning Institute. He is the author of "The New Retirementality: Planning Your Life and Living Your Dreams ... at Any Age You Want." Readers may write to him at: Advisor Insights Inc., P.O. Box 34, Rochester, Minn. 55903.



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