Thanks to several commenters in my going back to work post, I'm getting more enthusiastic about sending my kids to community college!
As a result, it may no longer be necessary for us to try and accumulate $1.5 million for two children to attend a four-year private college starting in the year 2036. It may also no longer be necessary to have to go back to work!
I know. $1.5 million for two kids to go to college sounds absurd. But the math doesn't lie.
$1.5 Million For College For Two Kids
Look up the all-in cost at any top 100 private university today. Boston University is at $86,000 ($344,000+ for four years). NYU is at $90,000 ($360,000+ for four years). USC is at $90,921 ($363,684 for four years).
If you compound $340,000 for 15 years at 5.4% a year, you'll get $750,000 for one child. But in reality, the total cost may be higher than $750,000 because costs will continue to go up while the child is in school. If you have two children, the total cost is $1,500,000.
Why assume my kids will go to expensive private universities? It's because I'm being conservative in my financial assumptions. I'm also being conservative about my kids' intelligence and work ethic.
Although I'm trying to help eradicate an entitlement mentality by making my kids work manual labor until they leave the house, I can't assume my teachings will stick. They are born with their own personalities and will grow up in a comfortable environment.
I'm also a realist. Both my wife and I have average intelligence. We went to public universities and didn't score high on the SAT. With the reality that Asian Americans also face higher academic standards to get into many top universities, going to community college is a growing avenue for people like us.
Little will change about college admissions after Affirmative Action was struck down by the Supreme Court. As a result, I hope to save lots of money and years of stress by going the community college route.
Making Six Figures After Graduating From Community College
If you can make at least $100,000 a year today, you are making a top 20% income. And if you can make a top 20% income by going to community college, even better!
Here's one comment that has helped convince me going to community college is a wonderful option.
Both of us went to community college and earned 6 figures before we both retired in our 60’s. All our children went to community college and transferred to state universities. Total college costs for 5 children: $180,000. No grants, no scholarships, nothing.
They paid their own way. They all earn over 6 figures and one son and his wife earn 7 figures. Relocate and live responsibly instead of high-rolling nonsense.
The fact that all five of Champ's kids attended community college, transferred to a state university, and earned six figures or seven figures is huge! Champ and his wife also made six figures before retiring as well.
The average earnings for community college graduates is around $33,538, so the above examples are high. However, the average community college graduate may not be a personal finance enthusiastic with highly involved parents.
With Champ's 100% hit rate of all his kids making six figures or more, we can postulate that attending community college was highly beneficial for their entire family. After all, earning $1,000,000+ a year is a top 0.1% income.
Of course good parental guidance, grit, choosing the right major, and longevity count towards making an above-average income. So does attending a solid state school like William & Mary. However, let's embrace community college for the affordable platform that it is.
Look at all the success stories from community college graduates in the comments section of this post! Here are more community college statistics by the Department of Education in case you’re interested.
How I Plan To Spend The Savings Thanks To Community College
If we stay in San Francisco, then we will shoot to send our kids to the City College of San Francisco. The in-state tuition is $1,168 a year, which our children can pay themselves by working minimum wage jobs. As a result, the $340,000 I currently have earmarked for my son's college expenses can now be spent!
It's hard to say by then whether transferring to a 4-year state university is necessary anymore. So for the sake of this exercise, let's say K-12 + two years of community college + parental education is enough education to make enough money.
The key is to change my mindset from being a prodigious saver to a lavish spender. Given the college financial aid system only believes parents should save 5.64% for college, I must bring down my saving rate from 30%+ to match. By matching the typical American consumer, I should feel much better about spending now.
I won't fully go into the typical American consumer mode by getting into debt to pay for a lifestyle I can't afford. Instead, I'll just try to spend down the $340,000 that I already have.
And given there is a penalty for spending our 529 money on things outside of education, I plan to just spend ~$340,000 of upcoming cash flow or sell other assets with no penalties and minimal tax liability instead.
Example Of Spending Like There's No Tomorrow
Below is a great example of an 29-year-old American couple living high on the hog and now fearing bankruptcy. I'd like to come closer to feeling what it's like to spend way beyond my means. I think it'll be exhilarating!
Given I'm in decumulation mode, this type of spending habit is helpful to observe. It's going to be tough spending the $340,000 earmarked for my son's college in the year 2036. But let me at least mentally give it a go through this post.
Given community college is inexpensive and could potentially be free, there is no need to save and invest for college anymore. It's easy for my children to pay for college by working while they're in college. Student loans are not necessary.
I usually like to trick myself into investing more by classifying investments as an expense. Since 1995, I've been addicted to accumulating wealth through investing. However, with community college as the #1 option, I won't be investing the $340,000 anymore.
Nice Automobile: $120,000
I plan to buy a new car in 2025 given my existing car will be 10 years old by then. If I keep the $340,000 in Treasury bonds yielding 5%+, by 2025, it will have grown to $378,000.
Given the best time to own the nicest automobile you can afford is when you have kids, I will buy a new or slightly used Range Rover or something similar for $120,000.
Yes, I will most likely be violating my 1/10th rule for car buying. But again, I'm just spending what I already have. This leaves us with $258,000 left to spend. But maybe I should save $82,000 and pick up a 2024 Honda CR-V instead. It looks great!
More On Vacations Each Year: $16,665
When our daughter turns six, we will start hopping on planes to go on more adventurous vacations.
In three years, the remaining $258,000 left over from our son's college fund will have grown to about $303,000, assuming a 5.5% annual return. Using a 5.5% withdrawal rate in three years, we can then spend $16,665 more on vacations a year while keeping the principal value the same.
I feel that spending a lot of money on travel when the kids can't remember or appreciate their vacations is a waste of money. As a result, we've just been taking local vacations to Lake Tahoe, Sonoma, Napa, and Santa Cruz. All places are within a 3.5-hour drive away.
Starting in 2026, we plan to do more slow travel. In other words, we plan to go to places like Taipei, Barcelona, Amsterdam, Beijing, and Paris for two months during the summer and one month during the winter. We'll also spend more time in Hawaii, Virginia, and New York, where we have relatives.
Yearly global travel during grade school should provide for a tremendous education. This is a huge benefit that saving money by going to community college can provide.
More Fine Dining: $16,665
With still $303,000 left, I'd like to also bump up our fine dining expenses by $16,665 a year. Not only do my wife and I enjoy eating well, our kids might end up eating more calories. They are somewhat picky eaters, which may mean they sometimes are not eating enough.
With a $16,665 decline in the college fund per year starting in 2026, the college fund will decline to $136,350 by 2036. As a result, more spending is necessary before then!
Around-The-World Cruise: $100,000
My parents have been good to me all my life and I'd like to be good to them back. Before COVID, they always enjoyed going on cruises. However, due to their frugal nature, they would purchase inside cabins with no views. That changes now that my kids will likely attend community college.
I'd like to buy them an around-the-world cruise for $100,000 within the next three years. The $100,000 should be enough for them to enjoy a room with a view and a balcony. If they don't want to go on an around-the-world cruise for two months, I can treat them to four, $25,000 cruises, each lasting two weeks!
After spending $100,000 on cruises, my son's college education fund will be whittled down to about $36,350 by 2036. There's only one thing left to do with the remaining funds.
Check out this nice cruise cabin I could get for my parents. Photo by Travel + Leisure.
Roll Over $30,000 To A Roth IRA
One of the consistent feedbacks I received about paying for college is to not pay for my kids' college tuition. Let them have skin in the game by taking out loans and working during school. This way, they won't take their college experience for granted. Maybe they'll work harder at getting good grades in order to get a better job.
My McDonald's job in high school was one of my greatest motivators to do better in high school and college. I didn't want to be stuck making minimum wage for the rest of my life.
With about $36,500 leftover in my son's 529 plan, I'll do the responsible thing and roll over $30,000 to a Roth IRA for him. Perhaps by 2036, the rollover limit will increase as well, thereby covering the entire $36,500 left.
With $30,000+ in his Roth IRA, he'll be able to take the best job offered to him, regardless of whether it is in a high-cost city. From there, I wish him the best!
Spending An Extra $1.5 Million Is Going To Be Near Impossible
Phew! Figuring out how to spend $340,000 in today's dollars ($750,000 in future dollars) was tough! Given I have two children, I've got to find a way to double my spending if both kids go to community college.
I just don't think spending $640,000 today, or $1,500,000 in future dollars will be possible for us to do. We've been too frugal in our ways for too long to make such a drastic spending change.
I guess I could buy two $120,000 automobiles. But owning two cars in a city feels like a PITA. We could spend $33,000 more on vacations a year. That will be fun and probably the easiest to do. Instead of flying Economy, we can blow our budget on Economy Plus baby!
We could spend $33,000 more on food a year. But I tried this for several months and it didn't work out well. I've got a new post dedicated to this topic entirely.
Finally, we could pay for two, $100,000 around-the-world cruises. But once you've been around the world once, do you really need to go again within the next 10 years?
All this seems excessive from a consumption standpoint. I don't think I could spend this much more money over the next 12-15 years. Neither do I feel comfortable giving this much money away before my kids turn into independent adults.
And to be clear, we have a different bucket of money for donations.
Maybe Spending A Fortune On Education Is The Easiest Path
After going through this thought exercise, maybe spending $750,000 per child on a college education is a better use of funds. Education, after all, is what will set us free. It is a lack of education that keeps people down.
It just feels dumb to spend so much money on college when everything can be learned online for free. The value of a college degree has declined. Further, if given a choice, I feel most children would rather go to community college and have $750,000+ in their bank account than go to an expensive private university.
A final takeaway from this exercise is how much LESS stressed I feel now that community college is a serious option. Not having to back back to work is a tremendous relief itself.
It feels great to no longer have to save for college. Given we superfunded two 529 plans already, it's also nice to have the option to spend a lot more money over the next 12-15 years. Finally, it's freeing to care less about college prestige.
Practical knowledge is more useful than book knowledge. But just in case going to commit college doesn't lead to six-figure and seven-figure jobs for my children, I plan to teach them as much practical knowledge as possible about making money.
Reader Questions And Suggestions
Do you think community college is the way versus a private college? Are there any other community college graduates earning six figures or seven figures a year? How would you spend your children's college savings funds if you no longer had to pay for their college?
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