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.

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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