A Simple, No-Effort Strategy for Paying for a Child’s Education
College is an exciting time, both for students and parents alike. For students, it means entering a new, intellectually stimulating world, perhaps a bit apprehensively, but certainly with excitement for the adventure ahead. And for parents, it means watching their child go off and have an experience of living on their own, “spreading their wings”, if you will. It’s an exciting time for all. However, there are certain practical matters related to college that are less exciting, but certainly important to discuss. I’m talking of course about paying for a college education.
The True Cost
A college education is more important than ever for success, and yet it’s also more expensive than ever. It was reported recently that student loan debt is now the second largest type of consumer debt held by Americans, behind only mortgages. Currently, total student loan debt in the United States is over $1 trillion dollars! Yup, that’s trillion with a T. To be exact, it is $1.2 trillion. There are approximately 40 million Americans who have student debt, and approximately 70% of graduates leave school with some type of student debt.
Many say that student loan debt is keeping them from making other major purchases and investments in their lives, such as buying a car, buying a house, or starting a family. And, it doesn’t appear as if things are going to improve any time soon. College tuition is expected to keep growing, and in fact, by the year 2030, tuition at a private (non-profit) 4-year institution could be anywhere from $71,373 to $100,239 per year. Even if one were to attend a much more affordable public, 4-year institution (in-state), tuition will likely still run anywhere from $41,228 to $57,609 per year. In addition, according to the Congressional Budget Office, total student loans are expected to increase by another $1.3 trillion by the year 2024.
Don’t Close Your Eyes
That was a lot of dreary facts being thrown at you all at once, and for that, I apologize. However, these realities cannot be ignored. Shutting one’s eyes and pretending like these realities aren’t what they are is not a proper response. Careful planning is needed, and luckily for you, you have several options in front of you (some more exciting than others).
Your first option could be to go the traditional route, by putting money into a savings account for safe keeping. This option is certainly safe, you have almost risk of losing the money, but it isn’t optimal. You’ll make almost no interest on this money, and in fact, the interest rates for most savings accounts nowadays are below inflation, meaning your saved money will actually be losing value over time. This certainly is not ideal.
Another option would be to invest your child’s college education fund in stocks. You’ll certainly get higher returns, but this is a risky venture to take on, especially for something as precious as a child’s education fund. In addition, a college education is an expense that exists far down the road. No one knows what the stock market will look like a month or even a week from now, yet alone 25 years from now. This makes stocks even riskier as a way to prepare for a child’s education.
What else is out there?
You could invest your money in bonds. These certainly are safer than the stock market, and better than merely hoarding money in a bank account. However, you run into a similar problem with the savings account, which is that bonds nowadays get unfortunately low returns on investment, with many of them netting returns that are actually lower than inflation, meaning that even though you’re earning interest, in real terms, your money is still losing value over time.
But let me propose to you an alternative investment to all of these for paying for a child’s college education. This investment is teak…
Teak is the best of both worlds. Teak gets very good returns, averaging a 5.5% increase in value over the past several decades, and in fact, averaging a 7% increase in value over the past several years. This is better than the returns you’d get on any savings bond and is on par or even better than average returns you’d get on most stocks, but without all the risks of stocks. And speaking of risks, teak is surprisingly devoid of them. The great thing about investing in teak is that you’re investing a hardwood tree. The risks are few, and the tree is strong and stable. The kinds of things that could be ruinous for a stock’s value, such as poor marketing or a general decline in the market, have little effect on the growth of teak. In addition, teak is becoming ever more scarce as old growth teak forests are being decimated, while demand for teak is increasing rapidly. Major markets for teak, such as India, are going through the massive population and economic booms.
How does it work?
What makes teak so perfect as an investment to pay for a child’s college education, however, are that the time frames of the two line up so perfectly. An investment in teak is certainly one for the long run. Teak trees take 25 years to go from seed to harvest. This sort of long term investment may turn some investors away, as they are looking for more immediate returns. However, this is what makes teak such a perfect investment for a child’s college fund.
To those who are thinking of having children, or recently had children, the excitement of one day sending them off to get a good education at a quality university is certainly on your mind. What also is probably on your mind is how to pay for that child’s college education. An investment in teak can be the perfect, no-effort investment to make for this far down the road expense. If you’re interested in setting yourself up to be able to pay for one of the most important, and pricey, experiences in a young person’s life, their college education, consider teak. Paying for a child’s college education doesn’t have to be complicated or stressful. It can even be exciting.
In-demand, yet of dwindling supply in the marketplace, Teak is a remarkably valuable hardwood that is extremely durable, practical, and beautiful. To learn more about this opportunity please watch this special presentation by Rachel Jensen and Mikkel Thorup.