Learning to Spend

Catherine Horiuchi

MY TWINS ARE OFF to college. They’re on different paths. One is attending an institution less than 100 miles from home, while the other will be on the far side of the continent. One has a full-ride package of financial aid from her chosen college. The other isn’t getting as much.

Every morning this past week, I’ve intended to pay the first semester for the twin who didn’t get a full ride. I have the cash. It’s earmarked, as is money for subsequent semesters. I’ve been saving for more than a decade. Neither student received grants from federal or state sources because my federally calculated expected family contribution (EFC) is high. The sum I have to pay is about half the EFC because my daughters were careful in choosing and applying to colleges.

Still, the payment is larger than anything I’ve ever previously paid for, except the homes I’ve lived in. The actual dollar amount is so large compared to the way I typically spend that it takes my breath away. The school offers a monthly payment plan—to ease the shock, I suppose. But I intend to pay in full, just as when I paid off the house and my car.

Following the school’s instructions, I initiated the tuition payment online. But I couldn’t push the “confirm transaction” button on the screen. My finger hovered—and failed. Several times. My solution was to give the task to my student. I said she would have to press the button. Her first semester at college hung in the balance.

It was nice that the screen displayed the exact dollar amount. It showed my precise contribution to support her higher education, the foundation for her becoming an adult and being prepared for future career opportunities. Her finger also hovered for a few seconds and then—bingo—the deed was done.

“I have to sit down now,” she said, somewhat overcome by what she had done and the cost of her higher education.

I can’t believe how much relief I feel having paid this semester’s tuition. I’m not certain whether my daughter will be there for one semester or many, but now I know I have it within me to occasionally spend big and according to plan. After decades of work and saving, my discretionary spending muscles are sorely underdeveloped. I can loosen my grip slightly.

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There are other big checks I may write in future years. Maybe I’ll buy a single premium immediate annuity with a long-term-care rider. A few years from now, I may offer to help with a down payment on a home for one of my kids. Maybe once the twins’ younger brother turns age 18, I’ll want to travel around the world or take up a new, expensive hobby. I might want to underwrite a chair at a university. As long as it‘s only in my imagination, I can find many different ways to spend lots of money.

Here are three additional reflections on paying for the first semester:

  1. “Nothing matters until money changes hands,” as the saying goes. Assuring the twins that I’d cover the cost of college is completely different from actually paying for it.
  2. The kids are aware that the dollars I spend on each one won’t be exactly equal from this point forward, even as I provide equal opportunities to pursue their educational aspirations. I wonder how to handle this potential inequity over the long term. Maybe one will need help paying for graduate school but not the other. Perhaps in 10 years, if I sense envy, hurt or resentment, or I believe someone has been shortchanged, I can amend my will. Meanwhile, I’ve found a way to demonstrate the economic concept of an indifference curve. We create a satisfying division of goods and services in our home through negotiation and dialogue, not via a precise allocation of assets.
  3. Looking over the growth of my portfolio while saving for college, I realize that cash and bonds don’t grow much more than inflation. If I save using only conservative investments, I must plan to save 100% of the money I’ll need for the future. But when I can tolerate more risk and portfolio volatility, and put savings into stocks, I might get by saving 50% or less of the money I’ll ultimately require.

Catherine Horiuchi recently retired from the University of San Francisco’s School of Management, where she was an associate professor teaching graduate courses in public policy, public finance and government technology. Check out Catherine’s earlier articles.

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Rick Harmon
Rick Harmon
4 months ago

You should have just borrowed the money. The nuts in DC think the rest of America should pay for kids to borrow not just the cost of Tuition but all the living expenses as well and then give them a free debt write off.

I am paying for two kids in college without borrowing a dime but I am seriously contemplating taking out loans just so those nuts can give me and my family something 60+% of Americans do not get. FREE education and living expenses for 5+ years.

4 months ago

My daughters are not twins, but one went to a much more expensive school than the other, and we paid for both of them, so I’ve had the same thought process about what is “fair” between them.

As an educator, it’s been helpful to me to consider the difference between “equality”—giving everyone the same thing—and “equity”—giving each person what they uniquely need. With that in mind, you are giving your daughters what they each need, which is access to a fully funded undergraduate degree. Yes, one got the full ride, I assume from lots of hard work—but I also assume that you and her father created the conditions (a supportive home environment) for her to be successful in this way. So you’ve already helped her get what she needs.

Also, I love the idea of having the student push the button to pay the tuition.

Rick Connor
Rick Connor
5 months ago

Congratulations on getting your twins off to college. The best feeling is paying that last check after (hopefully) 4 years. Best of luck.

We have recently been looking at new cars for the first time in almost decade. They seem so expensive, but my found the paperwork form her current (2013) car and it was only about 16% less than a brand new, better equipped model. So Honda Pilots have increased about 2% per year, but have more and nicer features.

5 months ago
Reply to  Rick Connor

Funny you mention the Pilot. We have a 2005 model and it’s still doing fine. I like the nicer features, too!

R Quinn
R Quinn
5 months ago

Even though it’s been many years I can relate to your post. Between 1988 and 1998 I had one, two or three children in school at the same time. I recall writing those monthly payment checks, borrowing from my 401k, taking a home equity loan, depleting all my non-retirement assets and working a second job. Paying for college is scary.

I never had the go to college experience (nine years at night), so I was determined to make sure my children did. The thing is, looking back I question if it is worth the money. Frankly, the way the system works I don’t think there is value for the price.

5 months ago
Reply to  R Quinn

Similar to you, I didn’t get the experience my kids will have. With little parental support, I could barely afford to live off campus with three friends who worked, I was the only college student in the bunch. I didn’t much like waiting for the bus or walking a half hour to/from campus, and though I enjoyed hanging out in the student union and watching movies in the campus theater, and I attended lectures and visited the galleries like anyone else, I couldn’t live on campus. Not sure honestly how big a difference this will make! But it was something I wanted and I’m hoping the on campus experience provides some lasting positive effect.
I realize not everyone is prepared to drive their car for 15 years so their kids can attend a four-year college. And I agree, I don’t think the way higher education is structured financial provides any equitable or comparable value for the price.
As a former associate dean, I have counseled hundreds of parents over the years about what I think college offers, and where they should look based on their capabilities and preferences.
Even “free” community college has opportunity costs, associated with how a person would spend their time and money if they weren’t attending that school. There are reasons a rational parent or student would pay full cost for a private education. But the bigger the total cost, the more carefully all should examine the decision. And re-examine it at each subsequent semester. I won’t make the “sunk cost” error. If this term goes bad, they can just come home and we’ll go to plan B.

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