everybody. Welcome back to Modern Financial Wellness. My guest today is my friend Jack Wang. He is a college financial aid advisor and the host of the Smart College Buyer podcast. Jack, excited to have you here today. Thanks for taking the time.

Jim, thanks for having me on. I'm excited to be here.

So there's obviously a lot of technical aspects to college planning, and we'll scratch the surface of a bunch of them today, but the show Modern Financial Wellness is really about financial wellbeing and our relationship to money. So when I think about college planning, I was excited to talk to you because it's really a big financial decision that a lot of people, both parents and students, put a lot of pressure on. Right, right. And it causes stress and anxiety to kind of go about it the right way and. And send your student to the right place. So, again, I'm excited to talk to you today because of that fact and, and kind of dig into the details of. Of college planning with you. So, again, thanks for taking the time.

Yeah, no, thank you.

And.

And you're right. I mean, it's buying. Buying college, as I call it, buying colleges is as big of a decision as buying a house, buying a car. And there's so many angles to this, but it's also on a certain timeline. Right. So, for example, like, people saving and eventually retiring, that's obviously a big financial decision. But people can always, you know what? I'm not going to retire this year. I'll work another year.

You can put that off. Or if people just want to move, they can say, well, I can move this year, I can move next year, whatever. If people have to move, that's a different story. But with college, there is a very finite timeline. So, yeah, your kid may be able to take a gap year, but it's not like they're going to take an extra five years to go out to college. Right. Whereas you can maybe, you know what? I don't have enough saved for retirement, so I'll work another five years and then retire or something like that. You don't really have that choice.

So not only is college a big financial decision, but it comes with a very, very finite timeline that doesn't really get pushed. You know, maybe you push it a year, but that's about it.

Right, right. And along those lines, you know, just like retirement planning, the sooner you start, the more prepared you are, the easier it's going to be, the less stress that's going to be involved. So I guess the first question for you is, when should people really seriously start planning for college. And I guess I'm not asking, you know, as soon as a baby's born, if you want to start putting money into a 529. Right. The sooner the better financially. And we'll get to the financial aspects, I'm sure. But the formal process of planning for college, when does that really begin? And when do you get involved working with families?

So it is earlier than people think. And so you're right. It's, you know, in an ideal world, you know, the day our kids are born, we're socking money away into some sort of savings. If you go 529 or otherwise and, you know, 18, and then fast forward 18 years and hopefully you're all set, I can tell you when my kids are born, that was honestly the last thing I was thinking about. Like, I was think about getting enough sleep and ups up to my eyeballs and like dirty diapers. Right, Right. So, basically, so, so to answer your question, it's earlier than people think, and. And here's why.

So the normal process is, if you think about a student in high school, freshman year, they're taking classes, sophomore year, they're taking classes. Maybe they take a practice satisfaction or something, or a psat. But junior year, especially the second half of junior year, is really when kids get going, right? And the reason for that is because guidance counselors are typically working with high school seniors in the fall of senior year. They're trying to get the applications out, transcripts out, test scores sent, whatever the case, letters of recommendation, whatever it is that they need to send out. So guidance counselors are super busy first half of senior year. But once those seniors get all the applications out, right, typically by winter of senior year, then their time is a little bit more freed up, and then they turn their attention to juniors. So we're really talking now about the second half of junior year. So this is when counselors start talking about more about grades and extracurriculars and finding the schools that might accept them and going on college tours and things like that.

When I say earlier than most people think, it's because of this timing effect. So, so I want, ideally I want people talking about this and starting to think about this freshman year. Because if you need to move money around or do some sort of financial strategy, if you do it in freshman year, that's before the base year. So you can do whatever you want and nothing matters, right? So now of course the pushback, you know, is that, you know, parents will say, hold on a sec, Jack, my kid just got to high school and you want me to already think about college? Yeah, actually, you know, and your kids grades in freshman year and even the path that they're on, whether they're taking like honors classes or whatever, or even some of the extracurricular activities, those paths start freshman year that eventually get reported on your college application and so really does start freshman year and not junior year as most people think.

That's interesting. So what are some of the, the high level things that, and I, I think you mentioned a few of them already. But when you're starting to think about college and freshman year and certainly entering, you know, sophomore year, the spring of sophomore year, that it really gets going. What are some of the things that people should be thinking about? What are the important factors?

So I'll break this down in two ways. For the student, it's really about fit, you know, so often, I know we'll talk about this, but so often families and students, right? If the student, let's say, knows that they want to major in business, just as an example, you know, how do most students or parents figure out what schools even apply to? Well, they'll Google like best colleges with business programs or best colleges for psychology majors or whatever it is that they're kids can major in. Right. And so a lot of times parents and students are focused on these like ranking lists like oh, XYZ school is the top program in the country for business or whatever. Okay. Of course it's a good place to start thinking about it. Sure. But you know, but you can't just be focused on that.

Instead what happens is when parents buy college, when they send their kid off to college and they pay for it, it's really no different than buying a house. You know, you can buy a four bedroom, two bathroom house anywhere in the country or in a city or in the suburbs, or in the middle of nowhere. But when you get to that house and you live it, that's when you really start to notice, like, wow, my commute from my house to work is much longer than I expected, or I don't like my neighbors or, or I didn't know this, right? All those sort of environmental factors. Well, that goes true for colleges as well, you know, and so large part, which ultimately is a financial issue is you want to make sure that the college or colleges that your students is applying to are where they truly want to live, regardless of the name on the building. And so, perfect example of this, I had several years ago, I had a student who was, who was fixated on like the Ivy League schools, right? Like he was going by name only. But if you really drill down, what that student kept saying was, I don't want to be in a city, I don't want to be in a city, I want to be outside a city. But most of the schools on his list were smack dab in the middle of cities, right? I'm like, they both that both things can't be true at once. You know, you either want to go to that school because you like the name, or you don't want to go to that school because you don't want to be in the city, right? But, but it can't be both.

And so what happens is that parents get fixated on this and they don't think about this. The reason that's a financial issue is because when students are unhappy at their school has nothing to do with academics. But when they're unhappy, you know, the school's too big, too small, too hot, too cold, hate the roommate, hate the food, whatever the case may be. And then they decide to transfer. What often happens is something called transfer leakage. Hey, transfer leakage. Yeah, transfer leakage.

Got it.

So basically, hey, Jim, you know that math class you took at school A, now that you want to come to school B, that math class doesn't transfer. So now at school B, you have to retake that math class, which lengthens out the time to graduate, which ultimately costs parents more money. So from on the student side, you really want to focus. Like, where do you actually want, like, where can you truly see yourself living, right? And the type of environment you want to Live in. So that's more on the student side.

It's interesting. Real quick, you know, as you started to describe the idea of fit, I'm hearing you say how important it is to figure out where essentially a 14 year old kid might want to live. Right, right. It's a, it's a. Or it's going to cost us money to change. Right. Just like, you know, buying and then eventually selling a house. Right.

There's going to be some leakage and cost to move eventually. Right. So yeah, yeah. So it's trying to explore where you want to be earlier in the process is again, probably a good idea.

Right. And also the, there's a couple aspects that. Right. Because it's hard even for adults to always be able to articulate those type of things, but it's okay to like, if you do want to, if you do a college tour when your students are high school freshmen, that that's okay. Right. Like nobody, in fact, nobody will ever complain. The people, you know, all the time on the tours, they'll ask like all, how many of you are seniors? Right. How many of you juniors? How many? Right.

And if you say that you're a high school freshman on a college tour, no one ever says, hey kid, you're way too early, get lost. What they all say is, wow, that's awesome. You're starting so early. I wish I had started that early.

Right.

It's only positive.

Right.

But it's hard to sometimes articulate what a student wants. So it's okay to also figure out what they don't want. Right. And so there's a lot of aspects to this too. And also as parents, you know, your child, are they real go getter, you know, are they more like just sit in the room and kind of keep to themselves? Right. That lends to either big school, small school environment. Do they want to go far away from home? Do you want them to go far away from home? Right. Because not all kids can handle that.

As much as we might often romanticize the notion of like, hey, I'm going to go to college across the country, from a practical standpoint, that's not realistic for most students, you know, so, so it's okay to start to figure some of those things out. And, and you know, you got a couple swings, you know, like, like over time, if you start this, let's say freshman year, you know, you can start to narrow down. Of course things can change.

I love the way you describe it as a buying college. Right. Using that, that descriptive term. And I can remember when we bought our first house, we were talking to a friend of ours who was a builder and at the time we were thinking about maybe building a house because we couldn't, you know, find a house in the area we wanted. And he could just kept telling us like, just go look at houses, just go to open houses and look around, you know, stand in the yard, stand in the house, start to figure out what it is that you actually like and don't like. Just, just kind of get absorbed in, in the experience of, of kind of kicking the tires and looking around, right?

Yeah, oftentimes because parents, parents and students get fixated on name. That would be like if you took a family of four and they want to live in this town, right? Because it's a really good town or whatever. But they, you know, family four, lives in a one bedroom apartment. One bedroom, one bath apartment, right? Yeah, they might be in the town, but they're going to be miserable, right? In a one bedroom, one bath apartment for a family four. So, so it, what happens a lot with kids is that they get to these schools like, yeah, I made it here. But then it's like, but I hate actually living here, you know, and so it's, it ends up being a financial issue, but. And definitely like a mindset, you know, values issue also. But as far as the, on the parent side, you know, you and I, we deal with money, but in this, you know, there's a lot to it beyond the numbers.

And so a couple things I tell parents to figure out for themselves. Number one is how much they can afford, right? Like, like what's the number that's comfortable for them, but also what they are willing to afford, right? So for example, you might be able to afford $50,000 a year, but if you have two kids, let's say, then you might only be willing to do $25,000 a year because you have two kids, right? You want to be kind of equal. But it also can go the other way. I have families that say, you know, we can afford $20,000 a year, but if our kid gets into their dream school, right? And the most expensive college these days is around 95,000. So if my kid got into their dream school and cost 95,000, we'll find a way to make that work. And there are mechanisms to allow parents to borrow that much, right? So how much they can afford is 20, but how much they're willing to pay is 95. And so those are very, very different numbers, right? The first number is really about sort of black and White numbers. The second question is really about philosophies.

Value ego, large part of it. Right. All these things.

Right, right. You mentioned how a lot of times people will start by googling the best, the best school for business, the best school for psychology. Right. And they start at the top of the list. And, and it's the big names that we're all familiar with. And a lot of people that I talk to, you know, aspire to send their kids to Ivy League schools. They have these reputations. And at the risk of maybe of, of asking a existential question or an unfair question to you, does the name of the school matter today as much as it might have in the past?

Yeah, that's a great question. And so in the past, the names of the school really mattered. Today really doesn't. And there's a couple reasons for that. But, but so much research has been done over the years and millions of college students have been interviewed or studied or whatever. And what they all find, all these research reports, courts end up basically saying the same thing. Name of the school does not matter. Ivy versus non Ivy has no bearing on ultimate outcomes except for very, very limited circumstances.

And in those circumstances would be like, all right, if you're, you know, if you're going to try to get in on a Wall street firm, investment banking job or something, or you know, the, some of the top law firms in the country, okay, maybe that might.

They recruit from specific places, niche industries.

Yeah, exactly. But that's like, you know, the.01% of jobs out there, right? Not even 1%. It's like 0.1. So name does not matter. Size does not matter. Small versus big, public versus private does not matter. And because college fundamentally works differently. So as, as parents, right, your kids are a little bit younger than mine, but as parents, like we, you know, when they're growing up through like elementary school, junior high, high school, you know, a lot of parents who have the ability, they try to move to towns with good school systems, right? Generally okay, to give your kid a best shot of getting a good education to go and do whatever they're going to do.

But in colleges, it doesn't really work like that. The college is. College experience is much more on the kid, him or herself, and taking advantage of opportunities. Because at the college level, if you are skipping class or if you're slacking on your homework, right? Because parents are at home, right? Kids in their dorm room, the parents aren't there to kind of oversee the kid. And the professors are not chasing the kids like, hey, notice you haven't been to class last three days where you been. Right. And so it's much more on individual initiative. And so you can have a superstar student go to a regional public school and do better than a average student, but who happened to get their way into my Ivy League.

Right. And one of the fears that parents have is, well, you know, like, for example, like if your son or daughter is valedictorian at a high school, right. You know, the expectation, the societal expectation is that, hey, okay, they're applying to Harvard or some, or some sort Ivy League. Right. But that may not be right for the kid. If your son or daughter is valedictorian and what's really right for their career path or right for their mindset is to go to community college. There's nothing wrong with that.

Yeah.

And, and I have to remind parents, it's not like your kid's gonna, is going to all of a sudden forget how to spell their own name. Right. That's kind of like the fear, like, oh my, like, like my kid's going to go to a lesser school or something. Right. Like, no, they're still like all those study skills, all the intelligence, all the smarts they have, they're still going to be there. But if they can take advantage of what's being offered in their, at their school, their program, they're going to do as good, if not better than a kid at a big name school, but who doesn't do any of that stuff.

Yeah. And you're sharing so many great ideas and I'm trying to connect some of these dots back to the, this idea of a dream school, right. Where a parent is willing to go from $25,000 a year to $95,000 a year because their child was accepted at their quote unquote, dream university. And I guess maybe it's a word of warning that if it's a dream university because it's the, it's the name at the top of the ranking list and it's an Ivy League school, to use an example, if it's not a good fit and it's not the place where the, the student is going to thrive, right. And be successful, then is the kind of dream aligned with the right reality. Right. Yeah.

Right. And there's a lot of living vicariously through your kids. Right. Like we see that in youth sports all the time. And certainly, and that is certainly a play here. And there's also a lot of ego. You know, the, the running joke sort of that I share is like, you know, do you Want your kid to go to an Ivy League school because, because of a specific reason? Or do you want to be able to just tell that idiot uncle at like Thanksgiving dinner right, when the whole family comes or, ha, ha, my kid gone to Harvard and yours didn't.

Right.

Or whatever. Right. Like, and it's usually a combination of both, you know, like, there's plenty of bragging rights, as there should be.

Yeah, the. And I've heard this is your term, the bumper sticker school, right. To be able to put the sticker on your, your, your car.

Now, now, having said that, I don't want to, I don't want to take away from the fact that those schools are excellent schools. Right? They really are. But especially today, if your student goes off to a college and takes full advantage of like, internships and research opportunities and all the different things that are afforded at all colleges today, really, they're going to get just as good of an education at XYZ State as they will at ABC Ivy League school.

Right, right, right. So starting early, trying to figure out where your student wants to be, what's going to be a good fit and where they'll thrive. Right. Overall, not just, you know, buying the label, buying the sticker. Yeah, right, yeah. As a starting point. Yeah, right, yeah.

But, you know, if you ask, you know, most adults, hey, what did you go to college for? Like, what did you major in versus what you do today? The majority of adults will tell you that what they do today for work has nothing to do with what they majored in. Now, now, certain professions, right? Like if you're a doctor, you're probably like pre med or biology or something, right? Like if you're an engineer, probably like that. If you're, you know, so there are certain professions where they directly align with, with a major. So you sort of have to be that major to end up where you are. But for the most part it's, oh, you know, like, I can't tell you how many, like, criminal justice majors I run into, like, as adults. And they're project managers at I. T Companies.

Right, right, right.

The writers, I mean, whatever. Right, yeah, take your pick there. But you know, but I know so many people are like, oh, yeah, I was a CJ Criminal justice major in college. I'm like, yeah, but you're not a cop. Have you ever been a cop? No. Have you ever worked on, like, law enforcement? Nope.

Right.

Like, yeah, yeah, it doesn't matter.

Yeah, yeah. It's interesting. I went to Bryant. It was college in Rhode Island. It's University now. And it was just the business school. There was just a business curriculum when I went there. It's since expanded as it's become a university.

And I always wonder, that kind of narrowed my opportunities in terms of my education. It worked out for me. I'm a financial planner. Fidelity was across the street. I mean, it was, it was, it all worked out. But is there a reason to consider more of a liberal arts, you know, undergrad versus trying to narrow, you know, your, your career path again as a 16, 17, 18 year old kid?

You know, in this, you know, I, I would say the answer to your question is absolutely, yes. I think sometimes it's hard to convince students and especially the parents of that because, you know, we hear these, we hear these stories in the news about kids who graduated with like a couple hundred thousand dollars in, in student loans, which by the way, mostly comes from the graduate level, not from the undergraduate, you know, but you see these stories in the press about, oh, I graduated College with like $300,000 in student loans and I'm a barista. Starbucks, right? Or I'm at like Dunkin Donuts or something, right? Something like that. And, and those are horrifying, right, because they're huge debt loads. You pay a lot of money for your kid to end up serving me coffee every morning. So the natural inclination is I want my kid to go somewhere where they have the best chance of getting a good job and, or getting into graduate school, which will then get them a good job, right? Depending on the field. The reality, if you actually look at what most employers want, what they're actually saying these days, a lot of surveys is they want kids to be better communicators, better sort of team, you know, better at teamwork, collaboration, be able to look you in the eye when having a conversation, be able to write a professional email without having to use emojis or texting shortcuts, right? And you can learn that anywhere. And I will tell you that at many liberal arts schools there are excellent business and engineering programs and kids who study, who go to liberal arts colleges do make it into medical school, right? Like, like it doesn't prevent them from doing it, but a lot.

But many times liberal arts schools will also provide that, those foundations of being a better communicator, better writer, things like that, which is really what a lot of employers are looking for. Because really at the, you know, once you're in the job that's, you know, you're really learning much more of the, of the technical knowledge, right? And in One example. So there's a consulting firm out there, the company's name. So, so, and this is public. So. So this company called Code Signal, C O, D E Signal. And what they do is they are a, I think their firm, they help like technology companies recruit workers, especially like entry level, like software developers. So what they did was they developed like a test, almost like an sat, if you will, that companies can give their applicants.

So what they started doing years ago was they designed a test that companies can use to start to screen out applicants, but they did not test for pure programming knowledge or computer science knowledge. What they tested for was problem solving. Right. And so, but of computer science majors. So every year they publish this list and you can, you can Google and you can download it for free. And of course the top technology schools are on the list, right? So your MIT's, your Carnegie Mellons and things like that. But it's not always, they're not always like number one, whatever, one year, one of the top programs for computer science majors because these guys taught their students how to solve problems not. Right, not just write code, was University of Central Missouri.

Like, like, like where was that?

Middle of a cornfield somewhere. Right?

Yeah, yeah. Williams College, which is a top tier liberal arts college is on the list. It's in the top 50 computer science programs every single year according to the surveys. Right. So they, so, so what they did was they surveyed the companies and the world workers and then they look back at where they went to college. Right. So it's really from the employer perspective of where their top workers came from. Williams College, Right.

Stony Brook, which is part of the State University of New York system. It's a public school on Long Island, Stony Brooks up there every year. So yeah, you have these top names, but there are these other names too that are just good. And in fact a lot of the more regional sort of STEM or technology schools that we might associate with being having great computer science programs, they didn't make the top 50.

Interesting.

I mean, you know, they're still great schools, but they didn't make the top 50. So again it's, I find it's too bad that some company out there doesn't do this for other majors because I think it'd be fascinating. But I actually like this report because if the goal is, hey, I want my kid to go to a college, be able to get a good job, et cetera, et cetera.

Yeah.

This report kind of refutes the fact that you have to go to a big name school to get that job Right, interesting.

And what was the name of the report again?

Where would people find it? Yeah, it's. So the company is called Code Signal.

Code Signal.

So I don't remember what the exact report's called, but they publish it every year. And I think if you Google Code Signal, like college rankings or something like that, you should be able to find it.

We'll Google it, I'll throw it up in the show notes, people can check it out. But again, it gets back to this idea that, you know, if we're just starting by name, right. The prestigious names at the top of the, you know, well known list, you might not end up in the right place. And you can get just as good, if not a better education that sets you down a career path by, by looking around. Right. A little bit more. Yeah, right, interesting. So, you know, once people, like I.

Said, a lot of ego. A lot of ego involved.

Yeah, yeah.

Oh, yeah. By the way, I should just tell you this. The. This effect, right? This sort of bind the name is the higher performing the student is, the more pronounced this effect. Right. And the better the school district, the more pronounced this effect. Right. Because after all, if you take the example of the school valedictorian, the guidance counselor suggests to the valedictorian, hey, you should apply to Ivy Leagues or near Ivy Leagues, then everybody sort of expects that, that.

But if the guidance counselor figures out that this student's really, truly better off at community college, they get fired.

Right, Right, right. Talking the kid out of applying to Ivy League schools as a valedictorian. Right.

Even though that might be truly the best thing for the kid.

Right, right. And as a financial planner, I go back to your, your comment before about aspiring to an Ivy League school or another institution that's going to have a $95,000 a year price tag only to find out in the middle of freshman year that your kid's miserable and they're going to transfer out of there anyway. Right. Or, you know, just not have the experience they could have is, is a good, great word of warning. Right. And yeah, a great suggestion to get out there early, start looking around. What's the good fit for this human being that you're sending off into the world by themselves? Right. Where are they going to thrive, first and foremost? Yeah.

So let's assume that. Go ahead.

Sorry, just. It seems really silly, but it's more serious than most people think. My number one recommendation when students go on tour is try the dining hall. You would not believe how big of a factor food quality is in college. Choice people don't think about it. Right. Because they're looking at the rankings or whatever else.

Right, Right.

But if you hate the food, four years is a long time to go with bad food.

Yeah. Is there anything else, any other suggestions? When people are out there trying to find the right fit, what should they be looking for or thinking about? Is there anything else that comes to mind besides the food?

I mean, obviously size of campus matters. Right. But I will tell you what the research says. The number one indicator of positive outcomes after school is the availability of experiential learning opportunities. And what that typically means are internships, co ops and undergraduate research. If you talk to every college in the country, they'll say of course we offer internships. But not all the schools help students get them. Some schools require them as a condition of graduation.

And some schools feel so strongly about it that let's say you got an internship doing whatever, but you happen to work for nonprofit. So let's say the nonprofit can't pay you. Some. Some of these schools that feel so strongly about it, they'll pay the student to do the internship. So maybe the employer can't pay you, but the school will pay you. Right, Right. And I've had schools like have programs like they'll pay for students. Oh, you gotta go out to California to do your internship.

Great. Will buy your airfare for you. Have a good time.

Yeah. And that gets back to. Right. Getting out into the world. Right. Experience, you're learning internships, like opportunities to, to get out into a field and do some work and meet some people and try to figure out what it is you want to be doing with the rest of your life. It makes a lot of sense. Yeah.

Interesting. So let's assume somebody has found the right fit. Sophomore, end of sophomore year, they're really looking at junior year and starting to get applications together and start to, to apply. What should people be thinking about at that point? What are some of the key factors to be aware of?

So there's a lot of articles that you can find on the Internet that offers tips on sort of how to qualify for more aid. You know, don't save in your kid's name or do this or don't do that or whatever. The key thing, couple key things to remember. Number one, income counts more than assets. So if you think about it like income tax rates, income is taxed for financial aid anywhere between 22 to 47%. But assets are only taxed if you will at 5%. So a lot of those articles out there, people telling you hey, go bury your money in your backyard. For most families it doesn't make a huge difference.

So that's really not the strategy. So you know, like a lot of like playing the games, how you get more aid, you know, there's, there's other things but like just hiding money isn't always the best thing. The other thing that I think most people overlook is how college integrates with the rest of their finances. Excuse me. Because after all there's only so much money go around, right? So if you are trying to save for your kids college and you're trying to save for retirement and you try and save for that vacation home or the vacation whatever the case may be, or paying down other debt, the more you go in one category, the less you have for the others. Right?

Right.

That's just the way it is. And so with, as a result I always encourage families to think about how they want to save for college and that's really about the accessibility and the flexibility. So 529s are a very popular way to save for college. Right? I know you know about them and we've spoken about them, but they're not always the right way. Sometimes other types of accounts may be better as a way to save for college and if you don't need it, it's accessible for something else like a retirement, whatever. So the types of accounts that exist out there, you know, you can save in a savings account. You can, you know, I've had people like hey, I want to, I want to pay for college by buying rental real estate, you know, and I read this article about how some one family actually bought, bought a business and ran in the money they made from the business was the way they pay for their kids college. So lots of ways you can do it.

Just how much sort of, you know, how much work you want to put into it, how much flexibility you need for other things besides just college, you know what your sort of, your tax situation looks like. And also quite frankly, you know, whether or not your kid may qualify for need based aid because you know again the general rule of thumb is to not saving your kid's name. But income taxes are a big part of this. And so sometimes I tell people you may want to save in your kid's name because your kid is at a lower tax rate than you are. Right. So there's a lot of positive, so it's not just, you know, a lot of families say well how much money do I have to put into a 529 starting today I'm Like, I don't know. And quite frankly, you know, think about all the things we talked about. Do you even want to use a 529 or would you rather use something else?

Right. And there's always, I think you hit the nail on the head with these other competing priorities. I see oftentimes clients who have the best intentions in mind of trying to fully fund their child's education. So they're putting a lot of their resources into a 529 because that's the usual suspect of where the money should go. But they're, they're not really taking full advantage of their 401k. They're not putting into a Roth IRA, which can be used for funding some of college in and of itself. Right. When they're not thinking holistically about the rest of their financial lives and how college and buying college is going to incorporate or impact everything else going on.

Right. So the sooner that you can sit down and think about it, not just in the vacuum of how much do I have to put away to send my kids to school, but what else is going on in my financial lives and how do I kind of make all that work, you know?

Right. Because people tend to use, I think the official, the technical term is mental accounting. Right. We tend to silo our money and silo for, you know, sort of the way we think about. Right. This is college, this is retirement, this is for my vacation home.

Right.

Et cetera.

Right.

But you know, the reality is, you know, and even as, you know, financial professionals, we, we have clients with accounts set up that way. Right. Like we sort of contribute to that problem and to some degree. But, but the, but the realistic, you know, view is that, you know, it really, at the end day, it really is just one big bucket, right. And, and how much you sort of want to have in terms of flexibility and we'll say this. So sort of an example, there's a family, I started working with them much later in the process. So they had already made their, their daughter had already made their college decision and she was going to a, a name brand school. But in her particular field, this family's other financial planner had told the family to max out their 401ks for retirement because this family, the husband and wife, they wanted to retire early.

So that, that makes sense. Right?

Right.

But as a result, they're having to borrow over $60,000 a year for their kids college and they still have another kid coming up. So I told them, like, look, I understand the thinking behind maxing out the 401k. And I don't disagree, but just understand that you're not going to retire early because all that extra money you're saving is going to go towards loan payments.

Right, right. Yeah.

So you're not going to get the outcome that you think you're going to get.

Yeah, yeah. So I love the one big bucket. I love the idea of avoiding financial accounting or mental accounting of where certain money, what certain money is for. And to me it's always about maximum flexibility. So sure, 529s are great tools and if you want to put some money into a 529, if you're sure your kid's going to go to college, great. But you should also be putting money into Roth IRAs and you should also be, you know, making sure your cash flow is such that you can save in non retirement investment accounts. Right. There's nothing wrong with selling stock or using dividends in non retirement accounts to supplement what your needs are to pay for your kid to go to college.

Right. So the more buckets you have right under this big umbrella that is your financial situation, the more flexibility you're going to have at the end of the day.

Yeah, exactly. One thing that a fairly recent client just shared with me and I thought that this was such a unique way to think about it and I was kind of shocked at myself that I hadn't come up with this or run into this before. Now this was a pretty wealthy family, so they had money for college, but what they did was they basically told their kids, look, you're each going to get X dollars for college. If you need it all for college, we have it, we have it saved. However, if you spend less than that, then we will give you the difference. Whatever part you don't spend either for a car or like down payment on your house or something. Right. So it gives the kid incentive to maybe spend a little bit less.

A little.

Thought that was so smart.

Yeah, yeah, yeah, absolutely. Yeah. There's so many ways to go about it. I'm glad we kind of arrived at this point of just, you know, opening up max flexibility and really understanding your unique financial situation. Right. And aligning that with what's the best situation for your kid. Because I think a lot of us, our instinct is to do the best for our, our kid and, and try to fully fund college as, as much as we can. But that isn't really reality for a lot of people.

And you know, I, I always cringe a little bit when I can see on paper that we're foregoing our own retirement or financial future or financial independence in the future because we're overfunding a 529 plan.

Right.

And I usually tell people, I'm wondering your thoughts on this, but usually our target, we usually recommend it's trying to fund about a third of what the college experience would cost and kind of go on from there. There's nothing wrong with saving a third, borrowing a third, using a third, you know, from somewhere else. And there's a lot of different ways to think about it.

Yeah, I mean, I think that's a great strategy. I would say even with that, you really want to. I would encourage parents to really think about what that means, because if you ask most families that we would deal with, hey, do you want to save and pay for college? If you ask that question, the answer 99.9% of the time is going to be yes.

Right.

But if you really drill down and ask what they mean by that, that's when you start to get really different answers. And that feeds into everything we've been talking about that I've had parents say, or one spouse say, well, you know, I went to private school. My parents paid for all of it. So they didn't. So I wasn't burdened with student debt. And I want to be able to do that for my kid. Right. So again, private school today, 100%, it's like 95,000.

And then you have the other spouse say, you know what? My parents couldn't do that. I had to work my way through school. So. And I want to be able to give my kid this sort of that same experience. Right. So they have a stake in the game. So I'm going to pay 50% of public. Well, 50% of public, especially around us, is still around 15, $16,000.

Right. So in all my years of doing this, I rarely, rarely have both parents agree on what they actually mean by saving for college. Right. Because if you're trying to save a third at 95,000, that's one thing versus a third of 15, 16,000, that's totally different number. There's a different ballpark.

So, yeah, I see that a lot, too. I think I see it with all financial goals, but since we're talking about college, it's a great example of getting really clear with what your goal is. And, you know, to use a popular term, what's the why behind it? Why do you want to fully fund college? What does that mean specifically? And why are you saying that? Is it because your parents did it for you and Is that the right situation for you currently moving forward? Yeah, that's, that's a really critical topic that you just touched on for parents to think about and talk about is, you know, what do we want to do? What exactly does that mean? Is that reality for us in our current financial situation and why do we feel that way? And is that reason valid to really test and kind of probe, you know, why your motivations, what your motivations are and why you feel that way is. Is really kind of an enlightening experience for a lot of people because you're right. Then they're. They're very often not on the same page. When we start college and it starts out with the really, you know, of course, the question. We all want to send our kids to school and we would all love to pay full, full ride.

Right. And pay the full fare, but that's, that's often not reality.

Right.

I know we're getting up against the time limit here, and I, I suspected this would be the case. It's a really dense subject and we just scratched the surface. So we're gonna have to have you back in some format to maybe get into some more technical strategies and explore this a little bit more in the future, if you're willing to come back.

Yeah, absolutely. No, would love to come back. Love talking about this, but so much of this is mindset, philosophy, values, egos, emotions. Honestly, the, the, A lot of my conversations with clients, the numbers almost become secondary. Yeah, they're important, but it's understanding the why, like you said, why do you want to do this? Why is this important to you? Is usually takes up a far bigger chunk of the conversation. So the more that parents and students can sort of have that conversation amongst themselves, the further ahead they're going to be.

Right? Right. Yeah. And finding the right fit. Where are you going to thrive? You know, we can figure out the money. Right. We all do. Right. It's more important.

Where is your kid going to be happy and thrive? So again, Jack Wang, we appreciate your expertise. We appreciate you taking the time. We'll. We'll talk to you again in the future. Real quick before I let you go, where should people check out your work? Websites, social media? Where. Where should people go to to connect with you if they want to reach out?

Probably the best place on social media platforms, probably the best place is actually LinkedIn. Okay. So if you look for Jack Wang Wang college financial advisor on LinkedIn, you should be able to find me. My picture even does look like me, where I post a lot of articles tips. I'm doing a series of I'm trying to do a series of short videos each week on like common financial aid questions. So follow me there. You can actually learn a lot from that.

Yeah and I'm following along to Jack already and I can vouch for the fact that he puts out a lot of great content. Always getting quoted in a lot of the public major publications that people are going to to try to figure out where to send their their child to school. Jack is is quoted in a lot of them already so definitely check that out. A tremendous resource. So Jack Wang everybody, thanks again for listening and check everybody out next time. Take care. Thanks again for listening to this episode. A quick note, although I do hope that the information that we talked about was helpful.

In no way is anything discussed on the podcast to be taken as specific financial advice. Please consult your own advisors and do your own research when you're making important financial decisions.