Who doesn’t want their children to have a financially secure future? Unfortunately, if you do what everyone else does – particularly the overly indebted middle class – you might actually set your child back while burdening your own financial future and theirs. Before enrolling them in pricey private schools in hopes of getting them into a “good” and likely pricey university, consider the following and put your money to better use for their future, as well as yours.
The Price of Admission
According to Private School Review:
- The national average for private school tuition is approximately $10,671 per year (2018-19)
- The private elementary school average is $9,631 per year
- The private high school average is $14,575 per year
That works out to $138,723 that you would spend to put your child through K-12, let alone preschool. And that’s if prices never rise in those 13 years (highly unlikely).
Unless you’re sneezing money, that’s a lot of income you would spend. The question is, why spend it in the first place? After all, many public schools do an excellent job of educating students.
Here are the top benefits listed for enrolling in private schools according to Private School Review:
- Students who attend private schools can be more academically challenged
- Exposure to clearer value systems
- Given greater access to teachers
- May simply feel safer than local public school options
While these benefits sound nice, none of them actually speak to how a private school experience will give your child a leg up in college or the real world, especially financially. Will that tuition really buy your child the “best education”, get them into a “good university” or actually lead to their future “success”? These aspirations, when you think about them deeply, are nebulous. What do they even mean, let alone how can private school deliver on them?
If you think being academically challenged will be good for your child, remember that it could actually make for lower grades and more emotional stress for them unless they are the Einstein of the class. After all, universities and colleges only look at the GPA and test scores your kid gets. That B+ average at a rigorous private school will equate to the same B+ average at a less rigorous public school on university admission scoring algorithms. Your child might actually shine brighter in public school too and get better grades there, increasing your child’s acceptance chances at those same universities. And that’s just for starters.
One concrete thing private school will do for sure though is take a bite out of your finances and not just because you’ll lose over $10,671 a year on tuition, and $138,723 for K-12.
A Better Return for Their Future
Let’s actually look at how you can grow your child’s options and financial success with that same money. If you instead invested the tuition money on behalf of your child every year in an S&P index fund at the average return of 9.8% per year, you would have accumulated $283,540 for your child from kindergarten through graduation from high school.
That’s a nice chunk of change your child could use toward university, buying a house, starting their own business, or funding their retirement. Will enrolling them in private school offer the same options down the road or will it bite into your finances now and how you’ll be able to help your children financially in the future? After all, if you’re spending that money on tuition, it means you’re not putting it toward your retirement or other investment goals or setting up your child to be financially secure in the future.
Why do I suggest investing in the S&P index? The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent for one thing. That’s a fantastic average and means your money doubles almost every 7 years. Each year’s return varies but over the long-term, it averages out nicely. The index fund covers the top 500 US stocks so that means no need for fancy investment knowledge or random stock picking. Additionally, you can buy the index easily and cheaply through brokerages like TD Ameritrade, Scottrade, etc. without extra fees eating into your return. Basically you can invest and leave your money to grow over time through automatic contributions and dividend reinvestment.
An index fund is only one option. There are plenty other investment options that will grow your money for your child’s future.
Options, Not Debt
These days, students face debt at every corner. Parents shouldn’t feel like they need to spend an arm and a leg on primary and secondary tuition just to get their children into a university that will likely leave hefty private or public school loan debt without even the assurance of a job to go along with that diploma. That’s a huge financial burden for everyone involved.
Some university debt statistics for thought:
- Average monthly student loan payment (among those not in deferment): $393
- Average debt at graduation from public and nonprofit colleges was $28,650 in 2017
- 75% of graduates from private nonprofit colleges had loans (average debt of $32,300)
And if you have hopes for your child becoming a doctor, lawyer, engineer or continuing beyond their bachelors degree, here are combined undergraduate and graduate debt by degree:
- MBA = $42,000 (11% of graduate degrees)
- Master of Education = $50,879 (16%)
- Master of Science = $50,400 (18%)
- Master of Arts = $58,539 (8%)
- Law = $140,616 (4%)
- Medicine and health sciences = $161,772 (5%)
- Other master’s degrees = $55,489 (15%)
Clearly, as these student loan debt statistics show, the cost of attending college is becoming a growing burden for a huge portion of Americans.
The bottom line: Don’t spend your money on K-12 tuition. University will be plenty expensive enough. Put that money to work for you and your child instead. Invest it, let it grow, and offer your child something beyond a high school diploma from a pricey school that probably won’t help them get ahead despite that fancy school brochure touting its low student to teacher ratio and tons of extracurricular activities.
Invest Smarter in Their Futures
Don’t put yourself at financial risk chasing prestige schools that won’t deliver the goods. Many middle class and upper middle class families feel private school is the way to go thanks to spend-heavy middle class culture and keep up with the Joneses peer pressure. When you consider the financial squeeze over time thanks to tuition money that could have gone elsewhere, the benefits of private school don’t actually seem to pan out. The main benefit? Bragging rights over the school name. That seems to be it.
Give your kid a brighter future. Invest the K-12 tuition elsewhere for them. Use it to instead offer them a debt-free university experience, money for a house, capital to start their own business or as a basis for a comfortable retirement. That will get them far more ahead of the pack than anything else you could do with private school tuition money.
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