Color of Money Live: Helping your kid pay for college

May 25, 2017

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Thanks for joining me today. As always taking any and all of your personal finance questions. 

But the main topic today is young adults and their money. So hopefully there are some young folks on the chat.

Or if you're a parent ask for them, since we do a lot anyway. 

Feel free to pick the brain of my guest too. 

Let's get started. 

I know you have discussed life insurance before but can't find your advice on it and need it now! I had life insurance thru my old employer but lost it when I switched jobs. I'm now looking for a small policy (about $100,000 payout), that would enable my spouse to pay off the last of the mortgage in case something happened to me. Should I get term? Whole? I'm guessing I'll only need it for about 10 years, which is when our mortgage would be paid off. But maybe we would keep longer if we wanted that extra cushion in case one of us passed. How do I find a good policy? Thank you!

Sounds like you're a good candidate from term life, since you need the policy for only 10 years. Term is the most straightforward and cheapest. Check out TIAA & Ameritas, which sell direct to consumers. Also check out comparison sites like,, and

I agree with Beth. Term. But make sure you are considering any other expenses that your spouse might have without your income. The policy for $100,000 might be enough but just keep in mind other stuff especially if you have children.

Just last weekend, my youngest sibling graduated from college - there are 6 kids in our family, and we all attended college and graduated debt-free. I thought that we were poor growing up, but when I got older I realized that my parents believed our education was the top priority and sacrificed for it. They did this on one income (not a huge one) and managed to pay off their mortgage along the way and still give us wonderful childhoods. We are all on own now (even the new grad), living debt free and passing on the example they gave us. It's not my own testimony, but I'm so proud of them and grateful for the example they set!

It is most definitely your testimony because you are their testimony because you are now living by their example.

Love parents like yours. Give them a hug for me!

And thanks for sharing.

So where my other Thursday Testimonies. You guys been falling down on the job!!!

Hi Michelle, Thanks for all your advice and various topics. Very informative overall. What is your opinion on HSAs? We made the switch this year, however I nearly choked over the amount of the deductible when I first saw it. I feel that this is a right step in our future, as the HSA will always be ours, as we have begun funding it.

If you choose a high deductible plan at work, you'll need to make sure you have the cash on hand available to meet that high deductible. One way to do this is through an HSA which lets you put the money away before tax. And if you don't end up using it, it grows tax-free and be used to pay for medical expenses in retirement.

A agree with Beth. This can be a great way to save. Just know what you are getting into. 

Hi Michelle, After five years of hard work and perseverance, I graduated from college debt-free (including consumer debt)! In addition, I received monetary gifts from family and friends and I'm in the process of deciding how best to save/spend. Suggestions?

Congrats! That's terrific. You've hit a real milestone. For you, the goals are saving big time. Do you have a job with a 401k with matching. That'd be my first stop. For every dollar saved, if you get a dollar, that's 100% return on your money. For money you can get at easily, probably best going with a higher paying bank savings account right now--or a credit union. I know of one credit union that pays 2.5% up to $10k in a checking account. So shop around. The goal here for this money is an emergency saving cushion of 3 months worth of living expenses. You won't make big bucks on this, but it will be safe.

I would do the following with the gift money.

1. Save some for emergency fund toward a goal of 3 to 6 months of living expenses.

2. Save some for a life happens fund. This is different than the emergency fund. That's money you don't want to touch. the life happens money is touchable for car repairs, etc. It's a separate account that will have money coming in and going out for the things in life that happen. This way you aren't depleting your emergency fund.

So if you got for example $500. Put $200 in the emergency fund and $300 in the life happens fund. Since you are starting out you might aim to have about $2,000 on the life happens fund.

And good luck with real life. 

Hi Michelle. The other night I was with other adults and mentioned that my husband and I hoped to be able to pay (and are planning/saving to pay) for our two sons' college educations. One of the adults replied, "Better than that, why not tell them now that you expect them to pay for it on their own?" Another adult piped up and said that they "knew kids whose parents paid for college and they were entitled brats." I was fortunate that my parents paid for mine and my sisters so neither of us had debt upon graduation. I'm hoping to do the same for my kids. (And feel lucky/blessed that this is a real possibility.) But how should I have responded to these nay-sayers? Thanks!

I get this ALL the time. 

And you know what? They are WRONG. 

The kid that was the brat would have been a brat with or without the college help. 

But in situations like this I say something like, "So if your child wins a full scholarship to college you would absolutely not let her take it right?"

They look at me befuddled. 

"Of course she would take the money," the parents might say.

"And you wouldn't think that this free money will turn your kid into a brat? Why not? Because your theory is the free money or the fact that your child does not have a 'stake' in the game (meaning loans)  is the reason they will be an ungrateful brat."

If the parents or group is smart they will give you your props for a great comeback.

How in the heck are our kids -- who have been kids with no jobs -- going to pay for college? They can't unless they borrow heavily. 

We are paying for college for all three of our kids. But our money just like scholarship money comes with stipulations.

You have to get good grades. You have to stay out of trouble. You have to become active in the community or some program campus. You have to allow us to see your grades (which organizations giving free money require). 

So we watch. And if there is a sign of ungratefulness then we pull the money back and are prepared to make them work (still no loans) to pay for college.

Feel free to use my comeback. 

Any others want to weigh in? 


I have two young kids (oldest is 2) and would like to start saving for their college through a 529. However my retirement accounts are woefully underfunded ($100k at age 40) and my emergency fund is depleted after my last maternity leave. I have about $500 left over after all my bills each month but I don't know where it should be going with these competing priorities. Can you help? Thanks.

You are like a sandwich--you're in the middle today and your kids and your future self are the bread. (Is this analogy a bit too gastronomical? Perhaps lunchtime.) Anyway, You really need to focus on that "future self" slice. Put the max you can into a 401k--especially up to matching. One important factor: if your family likely will qualify for financial aid, the money you have in retirement accounts like 401ks or IRAs may not be looked at as money you will have to contribute to college. Schools do consider savings in 529s. That said, once you max out of retirement savings plans, then look at 529s. Don't put them in your kids' name since kids are expected to turn over a larger % of savings to college than parents are.

I would say save for both. 

1. You have to save for your retirement because Social Security won't be enough and pensions are well like dinosaurs. 

2. If you don't save what you can for your child that means decades of debt for them. I wouldn't want that for my child. BUT...if you find you can't eek out more over the years once your children can understand college start to manage their expectations. They may not be able to live on campus or go out of state. They may have to start at community college and then transfer to 4-year college. And guess what? All of that is Okay. They will live if they can't live on campus. Save what you can and then plan college accordingly. Trust me on this. If we hadn't saved enough our kids would have gone to community college - which I might point out are more and more offering free tuition to talented students to get them to come. 

Look we preach all the time to live within your means. But somehow that message isn't receptive when it comes to college. We say go wherever you like baby and we will figure out who to pay for it. That's so wrong. It should be, "We tried as best we can to save as much as we can but this is all we have. So let's see what our savings can buy you in the way of a college education."

In my book retirement and college savings share similar places on the priority list. But to do one, you have to be willing to change your view on the other.

When you are given a mutual funds 1,3,5 year return is the expense ratio already deducted?

I believe it should be. That is a super great question. The average expense ratio for actively managed stock funds is a bit under 1% and for index stock funds its 0.11%! So it's basically 10 times cheaper to go with the index. Excellent question to ask!

Hello, Michelle. My fiancée and I are getting married in September. We bought a house together last year; we split the mortgage and house bills evenly. Otherwise, our money is separate and she pays her bills, I pay mine. I know it's customary to merge money when getting married, but that makes me feel uneasy. I'm protective of my money. I'm more of a saver than my fiancée is. Also, I feel uncomfortable paying half of anything my future-wife buys. For example, I quit drinking alcohol years ago and feel like I've saved thousands of dollars by doing so. If we merge money, then I'm paying half of every drink my future-wife orders and that doesn't seem fair. Should I accept that merging money is what married couples do, or would it be okay to keep our finances separate during marriage? Thank you.

This is such a common feeling for newlyweds, so don't feel guilty. You are being practical, not a premarital party pooper. Think about what would make you comfortable. What if you each put in the same amount into a joint account for joint purchases--a TV, a Toaster, a blanket. a Carribean vacation? Then tell your spouse that you were thinking it might be nice--if she agrees--if you each have your own independent money that you can each spend without conferring with the other. That freedom may be just what you need to get more comfy with this new arrangement. I would add that you should have a discussion on how you each want to be smart for the long term. You both should max out of 401k (especially with match) and each open IRAs (check out spousal IRAs too). Being open and honest--but not judgemental--is critical for good communication here.

I love that you are asking this question. And I hope you are ready to step back from getting married if you don't like my answer.

I think you are not ready to get married until you go through some counseling.


Because you are still thinking like you are single. 

To me marriage -- and I've been happily married 25 years -- is a partnership in which you share everything. EVERYTHING. 

You say that you feel uneasy. Why? 

Every night you go to bed with your significant other, a person who can smother you in your sleep. So that means you trust this person with your life. So why not with your money? 

You want to protect your money. But at what cost? I see some issues because you already have issues with how she spends on alcohol. 

And I get it. About half of marriages fail. But it's not marriage that is failing people. It's that they don't vet the people they marry or they go into the relationship with their money opposite or with  issues they have not sorted out.

For example, I get the drinking thing. I don't drink. And it's because my grandmother was an alcoholic. That means I chose not to marry a man who didn't really drink either. In a year he might have one beer or a few glasses of wine. 

If you are bothered by drinking might that be some issue you have to work out. And if not, why wouldn't you mind paying for what your spouse drinks. What if you didn't like chocolate ice cream? Would you begrudge buying it during the family grocery run? 

There are things you like that your spouse might not like but you each pay for it anyway. 

And on this fairness thing. No such thing in a marriage. There will be times things are 50/50, 60/40/ 90/10. And you have to be okay with that. 

I think it's okay to have an allowance that you can spend without judgment but otherwise all income, expenses and debt is a joint thing.

Otherwise, really -- and I mean this with all respect -- stay single. 

Michelle, I am a stay at home mother and because of my husband's 250K+ income I have been told I can not contribute to an IRA or Roth IRA. I would like the benefit of a tax deferred account. Have I been I have any options?

Here's the deal. From the figures you give, seems like your man is earning too much (nice problem!) for you to qualify for a Roth or a fully deductible IRA. BUT! You might qualify for a non-deductible IRA which doesn't give you an upfront tax break, but does allow your money to grow tax-deferred, which is still better than having it grow in a regular account on which you have to pay tax on the income every year. Or  you may be able to deduct a portion of your contribution. For more info: check out IRS Publication 590-A.

You are misinformed. Typically you do have to have earned income but the IRS gives an exception for a nonworking spouse in your situation.

So you are eligible for a "spousal IRA." Because you are married and if you file jointly your spouse can make a contribution for you.

You'll find tons of information about it online. 

My husband and I have trouble agreeing on home upgrades. For example he wants to redo the entire kitchen but all I can think about is our resell value. Is there a way to determine how much she should be investing in your home knowing you're going to sell it one day?

You are smart to be thinking about resale value. If your husband loves tiles, but his taste is a bit avant-garde, and no one wants to buy your kitchen because of it, you're in a pickle. Check out this piece in Consumer Reports about what you can do to improve your kitchen--as well as your resale value!

I'm a resident of PG County and our public schools are not great. I have a young child. How do you prioritize paying for private school in relation to saving for retirement? How can we make these schools better? :-(

This is such an important question. You are smart to be thinking about it. I think that if you are engaged parents--and by asking this question, you seem to be--I'd try to stick with the public school as long as possible. If your children are really young, as long as they have nurturing teachers and nice friends, it can be excellent. Private schools in the lower grades can be nearly as expensive as certain colleges. And it may not be worth the difference to a very young child. Each situation is different. But my instinct now is for you to stash the most you can in that 401k and other savings programs. In middle and high school you can always re-evaluate. But you can't go backwards and save tens of thousands of dollars in your 401k since there are limits in how much you can contribute each year.

I live in PG. Now I sent my kids to private school BUT (and this is the test for me)

1. We have an emergency fund with at least six months of living expenses.

2. We have a life happens fund fat enough to pay for a car in cash or to cover major car repairs, etc.

3. We have determined how much we need to save for retirement and are meeting that goal

4. We are/have saved for all three of our kids to go to college without any debts. Now that means state-like tuition and nothing more. But there are great schools in Maryland and ones they can commute to if we didn't have enough for room and board. 

If you can do all those things AND pay for private school with no loans or strain on your paychecks by all means pay for private school. 

If you can't go public. And I ask on this chat, how many of you when to public school?

If I could see you probably the majority of you would raise your hand.

I went to public schools in Baltimore. BALTIMORE.

And I ended up at The Washington Post. 

Just saying. I live where you live and while the schools can be challenging with involved parents, tutoring if need be they will be just find. 

Plus may I add this I took my girls out of private school for high school on purpose. (We sent out son to DeMatha because he has autism and we wanted smaller classes, etc.) Anyway the girls have done great. In fact, they have done better than quite a number of their peers who went to private school. And my oldest got more scholarship money than many of her peers who went on to private school.

It's about the kids. It's about the parents. It's about the support and attention you give.

If you cannot afford to save, save for retirement and save for college, don't do private.

If I had to choose between paying for private at the expense of saving for college, I would choose college EVERY SINGLE TIME! 

Today I'm making another 4-digit withdrawal from my investments to pay off some major expenses from this year that I put on my credit card (crazy expensive dog surgery, new transmission for otherwise healthy 2002 car, and a super-awesome multi-country vacation!). I've been dreading it and because ugh, I don't wanna see that balance go down! But I will still have enough left for a house down payment should I decide to do that and I realized, well, that's what savings is for right?! Plus, the money I'm taking out is all profit, it's money that's been simmering since the recession, so that helps sooth the sting. Even though I'm still cringing a little I'm very grateful I have this money and am able to do this. And it's all because a friend off-handedly gave me a personal finance book in 2004 which scared the crap out of me and started my savings and investment activities. :)

Not a kina testimony. It's an all the way live testimony. 

Good for you!!!!

paying for college will turn a kid into a brat are not at all able to pay for their own kids' college. It may be for a good reason (they are stuck paying for an expensive to care for relative) or a bad reason (they prioritized fun spending over saving for college) or some combination of both, but they can't do it. They are denigrating your decision because they are embarrassed and making your choice look bad is easier than admitting they can't do it. Peer pressure was terrible in junior high and it still is. Stick with what you know is right.

This may be true. But honestly, I've met parents who do have the money and think it will make their kid more responsible if they don't pay.

Look, I get it. Some kids mess up in school. But just like with a scholarship, you can put in place measures to encourage good performance. 

I won a full scholarship to college and it changed my life and that of my family. I will forever be grateful. 

My daughter just graduated from college and she shared what it feels like. Watch the YouTube video. 


Here's the link to the YouTube video.

I love your response on the scholarship. I'm totally stealing it. I think I'll start telling people that in addition to any scholarships my kids might earn, they have a scholarship from mom and dad waiting for them, as long as they meet our requirements. Thanks again!

You can totally steal it! 

My daughter is graduating college soon. What's a good book for her to guide her financial path?

Hmmmmmm. Let me see....Michelle? Any ideas? I just have to say here that I have known the amazing Michelle Singletary for years and years. She is a terrific personal finance writer with lots of heart--and super smarts. Thanks to her, my book--Get a Financial Life: Personal Finance in Your 20's and 30's-- has hit #1 this week on  Washington Post's general non-fiction list.  I think this generation of new grads needs good financial guidance now more than ever, so perhaps your daughter would like it too.

But even if it didn't, I have always loved following Michelle's down-to-earth, wisely considered advice.

Do what Beth said. Get her book :)

Hi Michelle: LOVE, LOVE, LOVE your chats and columns! My husband now works at the same university I do. He can join the 457b plan with a 3% match from the university. He can also join the ROTH 403b plan with no match. We max out our regular ROTHs and I usually have a little bit extra to put in my ROTH 403b (after putting money in our emergency and life happens funds, too!). Which should go with? I hate to miss out on the free 457b money match, but it's pretax. Thanks for your help!

I wouldn't miss out on any free money. Go for it. 

Hi, I've never been able to figure out how to research index funds. Is there a website for them?

Yes, but if you want my Get a Financial Life short hand, here it is:

Go with Vanguard and Schwab for index funds because they have the lowest expense ratios around. They also have super low ETF expenses too. (For more on ETFs, you can see my book).  And if you have only $100, you can start with  Vanguard's ETF because it has such a low barrier to entry! LOVE ETFS AND INDEX FUNDS AT VANGUARD AND SCHWAB. SMART!

Hi Michelle, Thank you so much for the chats and the columns! Submitting in advance: After receiving a rather unnerving voicemail earlier today stating that "the IRS is filing a lawsuit against you...", I googled your column(s) about IRS scams. I am so glad they are there as a touchstone. That being said, I am still unnerved. To get a name and badge number, I called the number in Berlin NH back. The person answering gave me a (supposed) name and a badge number and admonished me that conversations are recorded.. I tried to call the 800 number at the IRS to determine if that information is valid but, sadly, I got lost in the voicemail menu. Sigh. And I still have some of my marbles, but perhaps not all... I have double checked with my spouse to confirm that we have not received any mailings from the IRS. We have received our refund. But it still creepy. Thank you again for reminding us about how to respond these activities. Would you mind posting the links again? You are terrific!!

Oh I'm so glad you researched this. It is a total SCAM. 

Please, please ignore any of these type of calls. The IRS will write you and you'll know for sure if you owe money.

So please don't worry any more. But if you are unsure in the future please don't hesitate to shoot me an email. 

For the individual who asked about whether or not to merge finances before/after marriage, here is a suggestion: "Counseling" is not a bad word. Think of the counselor as a coach. An in-depth discussion with a neutral party (who has a lot of experience with relationships) will help you understand why you are more cautious with your money vs. the fiance who is more willing to spend. It's good that you can point to one experience that you are trying to leave behind: your own spending on alcohol in the past. There are probably more factors (good and bad) where that came from. A capable counselor will coach you to see and understand the other factors that may be behind the way you think and act. And you will be stronger as a result.

Love, love your addition to my advice. So very true. 

I did it when I got married and it so put us on the right path, one that we've stayed on for 25 years. No major money fights or issues at all. Truly. 

I just want to say that a group (I'm embarrassed to say I can't remember their name) came into my son's class and spoke to them about saving money. My kindergartner came home and suggested that we put money in the bank. I was able to assure him that Mommy has money in the bank, and Daddy has money in the bank, and even he has money in the bank! It blew his little mind.

Such a sweet story! Thanks.

Michelle, I've been reading you for a while now. I've saved 6 months of expenses in a money market account. I have a life happens fund that is almost fully funded. I also have a dedicated vacation savings account, so that I can travel guilt-free and just increased my retirement savings amount. In the last three days I've spent $0 by packing lunch and drinking the office coffee, and staying off Amazon. No credit card debt. Over-paying the mortgage and student loans (the smallest will be paid off this year). I still worry sometimes, and I will always worry about money because I've been poor and and debt. But I sleep a lot better at night now.

Take it from me, you are doing great.

Go sleep!

Beth, On behalf of my children I have been a good saver for them. When they were young I would save every cent from a birthday, Christmas and milestone event they would receive money as a gift. My kids are now teenagers...17, 16 & 14 and they each have over $5000 in accounts I control...but now they want their money. Ugh...any advice? I can't stand foolish spending.

I'm not sure where you saved the money on their behalf, but there's a good chance that it's not theirs until they are technically 18. I think you may want to explain that you were so careful with their money and put it aside for their college costs. Research shows that parents who tell their kids they have money earmarked specifically for college savings are about 4 times more likely to go to college. If your kids already are clearly college bound, and you have miraculously saved enough for each of them, then you could talk to them about the fact that at age 18 it will be theirs but you believe investing some, saving some and maybe even giving some to a charity is a great idea. If you are going to need to borrow for college (as will your kid) you can say this is money your child should think of as "book" money or "extra expense" college money (eating meals that aren't on the meal plan for example.)

So I get it. 

We save for our kids and they have their own savings. But this is what we do in our family. We talk. About money. All the time.

So when they want to spend on something big they ask us our opinion. And most of the time they take it.

You have to let them make some decisions otherwise they won't learn. Sometimes you have to let them buy something that you don't think is wise because 9 out of 10 times they will realize that as well. 

Okay, sorry but here is another video of my kid talking about a pretzel she wanted. I let it play out and man did she learn a HUGE money lesson. Watch it and I bet you will let them spend some of their money. 

Here's the YouTube video.

I see your questions and comments and so sorry I can't get to more. But got to finish my Sunday column.

I say it every week and it's true. I read all of what you send in. Some make it into my column or newsletters. So please keep reading the column (and share) and the newsletters (subscribe). 

Thank you for coming or coming back. I so enjoy interacting with you all. 

Take care and have a great holiday weekend. Don't spend too much :)

In This Chat
Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Wednesday and Sunday and is carried in more than 120 newspapers.

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Beth Kobliner
Beth Kobliner is one of the leading authorities on personal finance for young adults and is the author of two New York Times bestsellers, Get a Financial Life: Personal Finance in Your Twenties and Thirties and Make Your Kid a Money Genius (Even If You’re Not).
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