Financial Health Matters for Higher Education and Beyond

When I was living in the Philippines, my mom had set up a college plan for me, which dismayed and annoyed my dad because he did not believe in financial planning. Sure enough, he did not live to see the day that I will enter university. Because of an illness, he passed away before I even made it to high school. If it was not for that prepaid college plan, and my mom helping out, I may not have been able to go to the university I liked.

When Peter was going to university, he never got a full scholarship (only a partial one) to an in-state school in Florida. He spent a year working at a grocery store as he tried to save up for a laptop. It wasn’t as if he worked to help pay for college bills. Instead, he got a student loan to help pay for the 25% of the remaining college tuition, accommodation, books, food. You know, typical day to day college stuff.

The Bank of Mom and Dad

In our cases above, our parents helped in paying our college tuition and anything related to it. At the time, we did not really think much about the expenses related to college. We both knew it was expensive, but that thought was quickly put aside to the back of our minds.

We ended up partying (an extra expense), cramming for exams, going out to eat, playing video games, you know: stupid things a kid of 18 does when they first taste freedom outside of living with their parents.

I feel it has become a rite of passage, and unless your parents are well-off or at least middle-class and help support your college bills, you may not even reach college after all. Oh, let us not forget that some of your parents may have cosigned your student loans. Which means they are liable for the debt you took on as well.

Thanks to the bank of mom and dad, you experienced college.

But little did you know the burden you will share with them.

After the fun is over

4 years after you first start, you are now 22 and getting ready to start looking for jobs and preparing for the big day: graduation!

Peter did not work the 4 whole years that he was in college, with his mom insisting his time was spent focusing on his studies (he could have at least found a part-time job, in my view!). He eventually graduated in 2008, got a car as a present, only to find the financial crisis did not give him much leeway on finding a job.

So Peter went back to school to take up a Master’s degree. He graduated with his MBA in 2009, but again, no jobs. So off he went to Slovakia to live for a couple of months with his extended family, coming back to America a few months later to look for a job. He finally found one: a meager pay of $32,000 a year + overtime pay.

I, however, realized that I couldn’t finish my degree in 4 years, so I had to take 2 extra semesters to complete it. I hung my head in shame and immediately looked for a job that can at least pay for my last semester in college. I applied for student aid which gives me a 0% loan in my last semester, payable before I graduate. Surely the money I earned from my job will help pay for that last semester. I earned around $240/year to help pay for my life and college. This was no joke, but this was when I was living in the Philippines, pre-tax, and whenever I was late, a few pesos were deducted from my salary.

Back in the Philippines, working during college part-time or full time is not really heard of at all. In fact, that is one of the reasons I got a job in my employer after university. The recruiter saw that I worked my last year of college and gave me a chance. It was because my resume stood out from the crowd.

No Financial Education at All

See the difference between growing up in two different countries? Same tale: we expect our parents to at least help pay for our education. Some parents can’t afford college so the children need to find ways to help pay for growing college education bills.

When we start high school, we need financial education: we need to find a way to help us transition into a life and a community that is driven by money. We need to see how we are spending all this time working various jobs for little pieces of paper to help us live.

We need to know how to manage our lifestyle in preparation for the real world. Sure, we need to party every now and again and have a right to be a teenager, but we have to know that most of us will end up being in debt, either due to college or something else, and since we cannot avoid it, we should learn how to manage it.

We have a right to know that with all the part time jobs that we take during high school, none of it is really enough to pay for the full 4 years of college unless you are good enough to get a full scholarship. Then maybe, just maybe, you can scrape by without a student loan.

This needs to be a part of high school curriculum, when we are 16. We need to know why we need to start working now, throw average costs of college in our faces so we will know what to expect, and how we should thank mom and dad, and maybe also grandma and grandpa who helped contribute to our 529 plans to give us a little edge in life in the future.

We need to know abut compound interest, about how money works. We need to know basic accounting skills to help us balance our bank balances. In short, as high school students, we need to be shown this reality and not be sheltered from discussing money.

Repeat it every single year of high school (either in a class or as a special lecture) to emphasize financial education and maybe even during our first year of college. The loans we are accruing for college are getting higher and higher every year, and sometimes our family just can’t afford to pay for them, leaving us alone to figure it out.

Sometimes when we do figure it out, it’s may be a little too late, and not everyone gets breaks in getting good jobs without a college degree.

There is a looming student loan crisis wherein kids graduate from college up to their eyeballs in debt from attending college, but they also need to find a job so they can repay the loan and still have enough to pay for life: food, shelter, entertainment, transportation, clothes, furniture.

Starting out in the real world after graduation doesn’t seem fun anymore.

The Return On Investment of Higher Education

Let’s go back to Peter and my story:

After graduating in 2009, his student loans needed to be repaid. All that money he took out all those years that he was in college started accruing up to 8% per year. Not bad at the time, but I’m sure there are even higher student loan debt percentages that are out there. He paid the minimum every time while his parents chipped in $200 every month to pay extra to the principal to help pay his loans off quicker. Again, thanks mom and dad!

I paid off my loan when I graduated in 2006, but I had nothing to show after my year of working. I used some extra money after college expenses to buy unnecessary things. Buying those unnecessary things was a good lesson, because in my first real job after college, I was more mindful of my money. Without me being thrown into the realities of money, I may not have known anything about it.

I found Rich Dad Poor Dad (the book), because you know, in 2007, we didn’t have as many resources online about money as we do now, and I started my first foray into financial education. I turned my life around and decided to spend money on what means the most to me: travel.  Of course, I also helped pay for groceries and things around the house (I was living with my mom).

So is there really a return on investment after getting in so much debt just to go to college?

The simple answer is, yes!

The turnaround: or how we found financial education

In 2013, Peter and I met, and as a couple, we found ourselves getting serious and we started talking about money and the future.

We casually started talking about what we have, what debts need to be repaid, and so on. I came to the USA with no debts at all (thanks mom for paying for most of college), and I was working full time, saving, and investing. Let’s just say I was more financially savvy at the time despite coming from another country.

We took a look at Peter’s accounts and oh dear:

1. He put most of his money into a 0% earning checking account.
2. His student loans had a substantial balance because he wasn’t paying them as much as he could have.
3. He did not contribute a lot to his 401k accounts even though he could afford to save more.
4. He was living in an apartment that was almost half of his monthly salary, and commuting 20 minutes one way to work.

We turned his life around and within 2 years, he paid off his student loans in full, bought an affordable house (with me, of course), moved in to have a shorter commute to work, and was only keeping a minimum amount in his checking account – only enough to pay for the month’s expenses with a little buffer, and also maxing his 401k.

That was the power of financial education

You see, not everyone could be lucky to find somebody to teach them about financial education. I do take credit for teaching him this valuable lesson, but again, if I didn’t happen to have that epiphany moment in the Philippines and actively searched for information myself, I wouldn’t have known, nor would I have been able to teach Peter about financial health.

Fast forward to 2018, and we have a rental property, have growing investment balances, have an emergency fund, live and own our house, and are more comfortable in our financial life.

And let’s just say that Peter has overthrown me and has taken financial health more seriously as he now handles our money.

We still have full time jobs that pay a decent wage, and we are debt free. All the money we paid for in college has paid off, and we are enjoying the benefits now by investing any extra, and being mindful of our money.

You can turn your life around – it is never too late

College is a good experience, and unless you manage to create a solid business that generates enough income for you to survive on, it is still a necessity nowadays to get a good paying job that can help you become more free and comfortable with your finances.

All it takes is knowing in advance what to expect and how to handle your finances wisely.

**This is our entry to the #finhealthmatters contest hosted by CFSI.