“The experiences you have at college mean more than the college you attend.”
– Ann Garcia
Do you feel overwhelmed by the financial burden that comes with sending your kids to college?
Ann Garcia has helped thousands of families — including her own — save millions of dollars on college. Ann is the managing partner of Independent Progressive Advisors, a fee-only financial advisor, and the author of How to Pay for College. She’s a mom to twins who just graduated debt-free from their top-choice colleges.
Links (From the Show)
- Ann on the Web
- Ann’s book How to Pay for College
- I Will Teach You to be Rich book
Show Notes (Find what’s most interesting to you!)
- What is the value of a college education? [5:01]
- How do we ensure we get the most out of the college investment we’re making with our kids? [10:19]
- Kids having agency in the college search process. [12:49]
- How much student debt is okay to have? [14:37]
- What loans parents definitely want to avoid! [18:49]
- Subsidized vs unsubsidized student loans explained. [23:53]
- Understanding your financial aid package. [25:50]
- How Ann set up an allowance with her family. [36:11]
- Incredible lessons Ann’s son learned by making his own money early. [39:35]
- Early money mistakes are low-stakes mistakes. [51:29]
- College experiences are more important than the college itself. [56:13]
- Ann’s online resources. [1:04:09]
Click here for the full transcript.
If you liked this episode …
- Check out the following podcast episodes with Pod Friends Ron Lieber and Pam Andrews to hear more about the financial aspects of sending kids to college:
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Thanks for listening!
John
Full Transcript
This transcript is from The Art of Allowance Podcast, Episode 62, featuring host John Lanza and guest Ann Garcia.
00:00:00,320 [John Lanza]
Hello, and welcome to episode 62 of the Art of Allowance podcast. I’m your host, John Lanza.
00:00:09,570 [Ann Garcia]
Uh, something I, I would love for parents to understand is that your student’s success in life is more about the experiences they have in college than about the college they choose, um, or that, you know, that you, that you want them to attend. And there’s tons and tons of research out there showing that. One of the best, um, studies is the, um, Gallup-Purdue Index, that surveyed adults who are successful in life to try to identify what about their college experience, um, in- informs- informed that success. And what they learned was that it had absolutely nothing to do with where they went to college. You know, it wasn’t public versus private, it wasn’t urban versus rural, small versus large, any of those things. It really came down to a set of experiences, and the more of those experiences someone has as a college student, the more likely they were to be successful. [upbeat music]
00:01:13,540 [John Lanza]
My guest in this episode is Anne Garcia. Anne has helped thousands of families, including her own, save millions of dollars on college. Anne is the managing partner of Independent Progressive Advisors, a fee-only financial advisor, and she’s the author of How to Pay for College, her new book. She’s a mom to twins who both just graduated debt-free from their top choice colleges. So I hope you enjoy my conversation with the college financial lady, Anne Garcia. [upbeat music] Today I am talking with Anne Garcia, the college financial lady, who has a new book out called How to Pay for College. Welcome, Anne.
00:02:11,680 [Ann Garcia]
Thank you for having me.
00:02:14,200 [John Lanza]
Well, I’m glad you’re on. This is, uh, very relevant to, to me. I have a kid who’s in college right now, rising junior, another one who’s about to head there. Um, so this will be a fun conversation. But before we get into our conversation about kind of college, and college financing, and why college, uh, can you tell us a little bit about yourself?
00:02:35,560 [Ann Garcia]
Absolutely. I’m a financial planner, and, uh, part of the reason that I started pursuing this topic was that I found I, I was talking a lot with two groups of people. One were parents who couldn’t figure out how they were gonna pay for this big thing called college, and another was young adults who were really struggling with the basic building blocks of their adult financial lives because they were overwhelmed with student loans, and that was things like saving for retirement, buying a home, you know, in some cases, even having any kind of emergency savings. And that led me to conclude that if I could help that first group of people, that- those parents who are trying to figure this out, I, I might end up talking with less of that second group of people, um, because hopefully an increasing number of people would come out of college with less, uh, with less student loan debt than, than what I was seeing at, at the time. And so
00:03:28,580 [Ann Garcia]
answering the same questions again, and again, and again, led to a blog. COVID came along, and I had a little extra time on my hands, and an opportunity came up to turn the blog into a book, and so How to Pay for College
00:03:41,200 [Ann Garcia]
came, came to be.
00:03:44,020 [John Lanza]
Well, it’s fantastic, and I had some time to look at the book. It’s… It is very comprehensive, and, uh, I think it’s gonna be very useful to a lot of parents, and, uh, congratulations on publishing the book.
00:03:55,740 [Ann Garcia]
Thank you.
00:03:56,180 [John Lanza]
Um, and let’s, let’s begin with the kind of why college question, which I, I, I like because you actually ask this question in the book. Um, but this is interesting to me because there are notable people, I’m thinking of, you know, PayPal founder, Peter Thiel, uh, there’s investor and modern-day philosopher, Naval Ravikant, who you may or may not be familiar with. But they’re all people who are either, in Thiel’s case, paying people not to go to college, I’m not sure if he’s s- still doing that, but-
00:04:26,060 [Ann Garcia]
[chuckles]
00:04:26,780 [John Lanza]
… um, or hoping his kids don’t have to go to college, like Ravikant. Um, of course, interestingly, they went to Stanford and Dar- Dartmouth, respectively, but, you know, both cite it as a different time. We’re in a different time now. Um, and Ravikant has talked about the fact that, you know, you really, um, you know, this, it’s the ultimate time for autodidacts, where you can really kind of get in there and learn so much because so many great courses are o- are online. Uh, but at the same time, parents with good credit are stepping up to leverage themselves to the hilt with, you know, PLUS loans, or HELOCs, or whatever it might be, uh, in order to get into some of these colleges. So I think it’s worth asking, like, what is the value of a college education, in your opinion, as kind of a starting off point for us?
00:05:14,600 [Ann Garcia]
Yeah, and, and I think, you know, we have certainly some outlier people in our society who have achieved remarkable success without, without college degrees. And, and so let’s, you know, let’s stipulate that, but take that as the, you know, the exception that proves the- that proves the rule. For the vast majority of people, college degrees provide a wealth of benefits beyond just the economics. So economically, financially, a college graduate will earn on average a million dollars more over their lifetime than someone without a degree. The unemployment rate for college graduates is typically about half what it is for those without degrees, and in fact, in the Great Recession, when the national unemployment rate was at 10%, um, I read an article one day that said, you know, shockingly, the unemployment rate for college graduates had crossed 4% for the first time…. So there’s a tremendous amount of financial stability and security that a college degree, um, that a college degree can, can provide. But beyond that,
00:06:21,650 [Ann Garcia]
um, college has a lot of non-economic benefits. Um, college graduates, um, regularly score higher on life satisfaction surveys. Um, college graduates lead longer and healthier lives. Um, there’s less heart disease, less type two diabetes among, among college graduates, and obviously there’s a socioeconomic component, um, to, to, to those numbers. Something that surprised me is that for both men and women, um, you’re more likely to marry if you- as a college graduate than as someone without a degree. You are less likely to divorce as a college graduate than, um, than, than as someone with- without a degree. And so, you know, as a parent, when you think of your child now and in the future, and you think of what you want their adulthood to look like, chances are you want some of those attributes that come out of, that come out of having, having a college degree. Um, and so, you know, you’re right to want this, but you’re also right to have a financial path that gets them out the other side of college with a minimum of, of student loan debt. Because there’s one group of college graduates who don’t reap those benefits, and that’s the people who have excess student loan debt, the, you know, things that prevent homeownership. There’s actually correlation between, um, delayed marriage and, um, and student loans, or not having kids and having student, having student loan debt. So, so you’re right to want college for your kids. Um, you know, if you’re not one of the, um, Mark Zuckerbergs or [chuckles] Peter Thiels of the world, um, you, you might find that you want to fall in that, you know, in that median range of people who do have a degree and have access to the kinds of career paths, um, that, uh, uh, that tend to only be available to, to people with college, with college degrees. And you’re also right to put some financial guardrails around that decision, around that decision process. ‘Cause the unfortunate thing is, college is the one thing you can buy where your ability to pay isn’t considered in, in, in what you might choose. You know, when you go to buy a home, you- your- the amount of mortgage debt you can take on will be, will be limited. When you buy a car, you have to get approved for it. When you choose a college,
00:08:47,690 [Ann Garcia]
you can, you can borrow up to the full cost of attendance at the college of your choice.
00:08:52,830 [John Lanza]
You know, that’s really well put. Uh, and for the record, I’m pretty sure that Thiel, and unlike Zuckerberg, I’m pretty sure that Thiel and Ravikant both got their degrees [chuckles] before they decided that they don’t want, um, their kids to go to school, or, or in the case of Thiel, uh, anybody to go to school. I, I don’t think he’s, he’s that broad, but, um… So, uh, but it’s a v- it is a very good point that, uh, that it is one of those things that you can buy and, uh, and, and the amount, uh, that you actually could potentially afford isn’t, uh, factored in. So, which is something you address in the book, which is good, which is- ’cause part of this is, how do we kinda go about the search in a proper way? Like, you know, that’s, that’s something my wife and I discovered in our search with our kids, is that, um, although we did talk about money the whole way through, um, it was, uh, we, uh, it was only later that we realized, oh, we really need to show that, you know, this is… You know, if we take a, a tour of somewhere like Duke, and we’re also taking a tour of somewhere like NC State, in terms of price-wise, it’s important for them to see, um, you know, when we would be here in Los An- uh, in Southern California, you’d have kids arguing USC versus UCLA, and I was al- I would always interject and say, “There is one thing that you need to consider here, is that USC is double the price, probably triple the price, of UCLA.” So just, just… And that’s making no kind of distinction about which school is better, ’cause that’s gonna be specific to specific kids, but the price is clearly different. Um, so how do we, how do we ensure a positive outcome of this investment in our kids’ college education? I know it’s a very broad question, but what are some kind of steps-
00:10:33,250 [Ann Garcia]
Right [laughing]
00:10:33,340 [John Lanza]
… we can take to college? [chuckles]
00:10:35,030 [Ann Garcia]
Well, so I think, I think the first thing is,
00:10:39,130 [Ann Garcia]
your, your kid will have college options at whatever price point works for your family. There are so many different pathways through college. My son, for example, has a friend who just got her degree for zero dollars. You know, she did free community college for two years, and then she worked at Starbucks, and Starbucks has a partnership program with Arizona State’s online program, and so she finished up there and, and, you know, spent zero dollars on, on college tuition and, and has a four-year degree. You could also, you know, go the opposite route, you know, zero scholarships, zero financial aid at an eighty-five thousand dollar a year college and, um, and pay full price. So there are options out there, whatever your price point is. And I think one of the most important things for parents to do is to know what their budget is for college. And, and ideally, that’s something that you think about before senior year of high school. I think it’s a great activity to do when your kids are in middle school. Look at, you know, look at what you’re doing for savings. Look at what you could afford to pay out of pocket on an annual basis and say: Is this, is this tracking towards the choices I want my child to have? And if not, you can go one of two directions. One is, let’s look at what the other choices might be, or what the other pathways would be that would bring this cost to something that works for our family, whether it’s, you know, your student finding more scholarships, whether it’s looking at pathways like dual enrollment, community college program, or getting AP credits so that you can graduate in three years instead of four…. or it’s looking at what you’re doing financially and saying, “Is there an additional, you know, $50 a month that we could carve out of our budget to add to our savings?” Um, or some combination, uh, of the two. But ideally, you’re doing that before senior year of high school so that as you’re talking with your kid about college, you’re framing their expectations in, in appropriate ways. And I think to me, that’s one of the most important elements of planning for college. It’s equal parts financial planning and parenting. You know, you can come up with a great financial plan, but if you’re not having conversations with your kid about what that plan looks like and what the parameters are for their college search, it’s, it’s really all, all for naught. You know, your kid needs to have a high level of agency in the college search process because they’re the ones who are actually gonna go there for four years [chuckles] and, um, and you hope succeed and graduate and, and, um, transition off the family payroll, so to speak. Um, but there also need to be some par- some parameters for, for that search, and so I think having those conversations with your kids all along… And my book has a bunch of conversation prompts, but a couple of them are, you know, when your kids are in middle school, that’s a great time to start talking to them about the fact that college is important to you, and you’ve been saving for their college and saving diligently. It’s also a great time, you know, if they have friends whose older siblings are going off to college, have them look up what those colleges cost so they can get a sense of the range of costs, um, out there, you know, out there for, for colleges. When they’re in high school, I think it’s m- important to get r- more specific about what your budget is, and I think doing that i- from a goals-based perspective as opposed to a constraints-based perspective, helps position you as their partner in, in that search. And so, so a goals-based conversation may be, “It’s really important to us that you go to college, and not only that you go to college, but that you graduate with no student loan debt or a minimum of student loan debt. And we’ve saved diligently over the years, as we’ve talked about, um, and that gives us a budget of,” hypothetically, “Oregon State. Um, and there are probably other alternatives you can find that are within that same price range, and we’ll absolutely support you on that, but that’s really the price range that, that we’re looking at.”
00:14:41,401 [John Lanza]
Yeah. Um, those are all really good points. Um, what, what do you- how much student debt is okay, Anne?
00:14:50,021 [Ann Garcia]
Well, I think that the Federal Direct Student Loan program is a great, um, is a great set of guardrails on, on borrowing. I mean, it, it seems like if you… If, you know, if you listen to the news, you’d think student loans are a one-way ticket to the poor house. Um, [chuckles] and, and in fact, I- the Federal Direct Student Loan program is really an excellent option, um, for students. If it’s the difference between going to college and not going to college or going to a college that’s a perfect fit, that you’re confident that you’ll graduate from in four years versus going to one that’s not a great fit, where you might end up transferring, taking more than four years, taking out the Federal Direct Student Loan is a, is a great option. That’s the loan that a student can take out without a cosigner. There are caps every year on how much you can borrow, so by the end of four years, you will have borrowed $27,000. Interest will have accrued on those loans, so depending on interest rates, you, you’ll owe somewhere between, you know, 28 and $30,000 when, when your student graduates. Um, and that translates to a monthly payment of about $325 for 10 years. That is more than covered by the earnings difference between having a college degree and, and, and not having a college degree. The group that gets in trouble with borrowing, the biggest- the, the, the sector of borrowers with the biggest growth in student loan balances over the last, um, 10 or 20 years is parents taking out Parent PLUS Loans. Um, and, and so that’s what you want to avoid. Um, and, and if your student borrows more than the Federal Direct Student Loan program, you’re either borrowing Parent PLUS loans or you’re cosigning on, on private student loans for them, which makes you equally responsible for, for that debt. And, you know, if you’re a parent who’s in your late 50s, early 60s, or even older, when your child is graduating from college, that’s a tremendous burden to, to carry into retirement.
00:16:44,942 [John Lanza]
Yeah. Can you, uh, define the Parent PLUS Loan?
00:16:49,041 [Ann Garcia]
So the Parent PLUS Loan is the federal student loan that, um, that parents can, can take out. Um, with the, with the Direct Student Loan, there’s a cap on how much you can borrow. It’s the most, the most favorable loan of the different options out there. It has the lowest interest rate, the lowest fees, um, and, you know, and has all the protections of the Federal Student Loan programs. The Parent PLUS Loan allows parents to borrow up to the full cost of attendance at college, um, less any scholarships the student has received. So you can see, you can create a gigantic liability, um,
00:17:27,641 [Ann Garcia]
you know, and, and I always think, you know… I, I see parents who are like: “Oh, you know, we’re only short $5,000 a year, so we’ll borrow that.” I’m like: “But that’s $5,000 a year times four years, and you have how many kids?” Because if you say yes to the first one, you’re probably gonna say yes to the rest of them, um, to the rest of them as well. You know, college is one of those things where little differences in cost result in, in big differences, um, in liabilities, um, in liabilities over time. And I saw an interesting statistic, um, recently from, um, from Sallie Mae that, that said that about half of people who took out student loans did not intend to do so. So you might reasonably expect that college is gonna cost a little bit more than you, um, than you thought it was going to. So if you think you might be borrowing $5,000 a year, you might actually be borrowing six or $7,000…. a year. And again, times four, times however many children you have, that can, that can result in, in some pretty significant liabilities. Now, the good news with Parent PLUS loans is they are federal student loans, and so they are s- they have all the same, um, protections as, um, as do, as do the student loans, you know, with income-based repayment programs and, um, and, and things like that. Nonetheless, that’s a significant burden, significant financial burden for, for someone within a decade of retirement to be, to be staring down.
00:18:58,262 [John Lanza]
Sure. Uh, I’m, I’m glad you included a hazard warning in your book, um, about, uh, the using a HELOC to pay for college could result in the loss of your home. [laughing]
00:19:08,091 [Ann Garcia]
[laughing]
00:19:08,242 [John Lanza]
Um, can you also explain why, like, why you shouldn’t… Y- you, you- your opinion is you should not use a 401[k] loan to pay for college either?
00:19:16,522 [Ann Garcia]
Oh, my gosh, 401[k] loans, that’s like, stop! [laughing] No, never. Um, a couple of problems with, with 401[k] loans. You know, one is that, um,
00:19:28,601 [Ann Garcia]
typically, your 401[k] plan limits the number of loans you can take out. It might be one, it might be two, it might be three, but you might have four years of college. You might have multiple students going to college. There’s also a limit to how much you can borrow. You know, the maximum amount you can borrow from your 401[k] is $50,000. Now, those are all good reasons not to borrow. Here’s the best reason not to borrow from your 401[k]: if you leave your job, that loan is due within 60 days of, of you leaving your job, and you might leave by choice, you might leave not by choice, but either way, you’re on the hook for that loan within 60 days of, of leaving, of leaving your job. And if you’re under 59 and a half and you don’t repay it, you will pay tax on the outstanding balance, plus a 10%, um, tax penalty for, for a non-qualified distribution. So that $50,000 that you borrowed could turn into a, you know, $55,000 of, of tax liability.
00:20:32,702 [John Lanza]
That is scary, and-
00:20:34,502 [Ann Garcia]
Mm-hmm
00:20:34,512 [John Lanza]
… I saw that. That’s why I wanted to ask you that question, because I think that’s definitely worth it. Um, because I, I just see a lot of parents making crazy decisions, um, about college, and I also… I know the pressure that happens, um, when you have to make a decision about college. Um, because however much planning you’ve made, there is a certain amount of it that has to do with, you know, you applied to this many colleges, you got into this many, you know, what is the ideal college? And if the ideal college feels like something that really
00:21:04,822 [John Lanza]
might force you to stretch, it’s- that’s very hard to look your kid in the eye and say, “You’re not going to this particular place. You’re going to go to another place.” Um-
00:21:14,462 [Ann Garcia]
Yeah. Well, and that’s why I think it’s so important for parents to get ahead of that process and, and really partner with, with your kid throughout, you know, “Here’s how we choose colleges. Here’s our budget for applying to colleges, so let’s find colleges that meet our parameters.” And, and fortunately, there are some really good tools out there for figuring out what college is, is going to- is going to actually cost.
00:21:40,062 [John Lanza]
Yeah. Yeah. Um, you know, it’s, it’s- we have a similar situation to you, where, um, our 529… I mean, I don’t know what your 529, but our 529 basic- 529 basically would’ve cost- covered the cost of the UC, the University of California system, right? Um, but our, um, our fir- initial daughter is now at the University of Washington, and so state school, but not our state school. [laughing]
00:22:07,652 [Ann Garcia]
[laughing]
00:22:07,661 [John Lanza]
Right? So it’s, uh, you know, less than a private college, but more than, uh, a UC school. And, uh, so she took out some of the… She took out the, uh, federal loans. She has the, the, uh, subsidized loan and then the unsubsidized loan. One of the questions I actually wanted to ask you, this is a very personal question, [laughing]
00:22:26,831 [Ann Garcia]
[laughing]
00:22:26,911 [John Lanza]
… uh, for us to n- to know is, is we’re thinking of paying off our daughter’s, because, uh, financially it’s worked out that, uh, we could- we’re, we’re thinking of paying off her unsubsidized federal loans before forbearance ends and the interest starts accruing on the unsubsidized loans. Is there anything we need to think about before we would do, we would do that?
00:22:51,422 [Ann Garcia]
Well, I’d say the one thing to think about is the interest rates on those loans are, are pretty low. So, uh, interest rates on student loans are reset every year, and they’re based on the 10-year Treasury, and they have a set markup from that. So these are g- with interest rates having gone up, the interest rates on subsequent years’ loans are gonna be quite a bit higher. My guess is, in the current environment, money in your savings account is earning interest at a higher rate than those loans are accruing,
00:23:23,962 [Ann Garcia]
are, are accruing debt.
00:23:25,331 [John Lanza]
Point, yeah. Sure.
00:23:26,562 [Ann Garcia]
Um, so I would say those would be, those would be the ones I’d be in the least hurry to, to deal with, because with your younger, with your younger child coming up on college, if they are going to be borrowing, their interest rates are gonna be quite a bit higher. If your daughter takes out loans in her subsequent years of college, those are likewise going to have higher interest rates. So I’d say you’re better off using that money to minimize future borrowing than to, than to start paying off the, the current loans.
00:23:55,982 [John Lanza]
Great. That makes sense. Okay. Um, and I’m not sure if we talked about that, but the idea, you know, there… ‘Cause the, the federal loans are the unsubsidized and the subsidized, uh, versions. I don’t know if you wanna give a just quick, uh, description of those two, just-
00:24:09,141 [Ann Garcia]
Yeah, of course. So, so with, with student loans, not with Parent PLUS loans, but with the direct student loan, they m- they come in two flavors: one is subsidized and one is unsubsidized. A subsidized loan, no interest accrues on that loan-… um, while the student’s in college and during the six-month grace period before, before payment starts. Now, of course, no interest is accrued on any student loan for the last three plus, um, three plus years, but that’s about to- but that’s about to change. So as part of your student’s financial aid package, you may have student loans included, and they may or may not be, be subsidized. That’s the subsidy is, is a form of need-based, um, financial aid. If you’re offered that, take it, because that is basically an interest-free loan for the duration, you know, for the duration of, of college, and you can- and you can pay it back as you see fit. It’s a great cash flow tool. You don’t have to accept the unsubsidized, um, the unsubsidized portion of the loan if, if you don’t, if you don’t need it. You know, for example, if your student gets, um, additional scholarships, um, that would, that would cover the cost or, you know, with, with, uh, minimum wage being so high, you know, students are earning a lot in their summer, in their summer jobs and, and summer internships as well.
00:25:31,254 [John Lanza]
Yeah. Uh, that makes a lot of sense. It, it’s fun- it’s funny because we just went through that process, and we just accepted the, uh, the, uh, the subsidized loan and did not take, uh, for this coming year, the, uh, the unsubsidized loan. And it’s nice to have that flexibility, and you’re right, as a cash flow tool, uh, it is really nice to have that. [laughing]
00:25:51,594 [Ann Garcia]
Yeah. [laughing]
00:25:53,174 [John Lanza]
Uh, good, very good advice, and I’m glad we, uh, [chuckles] I’m glad we followed the right path on that one.
00:25:58,154 [Ann Garcia]
[laughing]
00:25:58,964 [John Lanza]
Um, so Anne, when your child gets in, and you receive this financial aid package, uh, which can feel, feel very overwhelming, um, how should parents- I mean, we talked a little about the, you know, the direct student loans. Um, but how… What should parents focus on when they get that? You know, and, and maybe you can talk a little bit about the EFC and the FAFSA, the, uh, uh, Estimated Family Contribution, um, and the, uh, federal, I always forget the exact term, federal application for… Y- you tell me.
00:26:32,054 [Ann Garcia]
Free Application for Federal Student Aid.
00:26:34,654 [John Lanza]
Free, that’s it.
00:26:35,474 [Ann Garcia]
So yeah, so there’s a bunch of things in there. So let’s start with the FAFSA and the CSS Profile. So when you up- in the, in senior year of high school, when you’re applying for college, you also file the FAFSA, and if you’re applying to, um, colleges that require it, you file the CSS Profile. Those are the two big financial aid forms. Um, normally, they k- they are available October first of every year. This year there’s a huge revamp of the FAFSA, and it’s not gonna come out until December. So just for planning purposes, you do not need to be in front of your computer on October first [chuckles] to file, um, to file the FAFSA. Now, the FAFSA calculates a number c- which has historically been called your Expected Family Contribution. It will, going forward, be called your Student Aid Index. That is what the federal methodology says your family should be able to pay for college every year. It’s, for most families, a truly horrifying number, um, because it’s often, you know, a quarter of your, of your income. And of course, you can’t spend a quarter of your income for, um, for college every, every year. Um, setting that aside, uh, colleges, w- when you file these, you tell the FAFSA and the profile which colleges you want this to go to, so that they can assemble a financial aid package for you. Now, if your expected family contribution or student aid index is less than the cost of attendance at the college, you are eligible for need-based financial aid.
00:28:08,974 [Ann Garcia]
Really important, you are not guaranteed need-based financial aid. Not all colleges offer it. Um, and not only that, but n- but need-based aid can come in three forms. It can come in grants, um, whether from the institution or a Federal Pell Grant, or many states offer, um, grants to students who are, um, going to college in-state. But it can also include student loans and, and work-study. Um, and likewise, if, you know, if you’re going to a school that uses the CSS Profile, same calculation, that’s your expe- expected family contribution. If it’s lower than the cost of attendance, you could be eligible for need-based aid. Um, and all of your, um, all of your colleges, when you, when you get an acceptance letter, will provide a financial aid award to you as well. Really important is to dissect that, um, that aid award, and my book has a worksheet for comparing financial aid awards because, um, people often look at the last number that says, “You know, this is your cost,” but that may include a student loan, it may include a Parent Plus loan, it may include work-study. So it’s- so as you review financial aid awards, it’s important to separate out what you’re getting in scholarships and grants from what you’re getting in what’s called self-help aid, which is, you know, student loans and, and work-study. Because those are your money and your time, and so, so essentially, that’s money that you, that you are going to pay, whether now or for the ten years after, after you, you graduate. Um, and, and so comparing on what your actual, you know, what your, what your, what your actual discount from the tuition is versus different ways that the, that the school is offering you to, to make up that difference is, is, is really helpful. Oftentimes, too, parents get really caught up, and students get really caught up in, “Look at this big scholarship I got,” and yet you have to look at the top-line cost [chuckles] to see what that actually, uh, you know, what that is actually subtracting from. Because a $20,000-a-year scholarship at an $80,000-a-year college is worth
00:30:19,214 [Ann Garcia]
less than a $10,000 scholarship at a $50,000-a-year, a, a year college. So it’s really important to make apples to apples comparisons. The way financial aid award letters are structured, when you look at different colleges’ award letters, it’s like comparing apples to taco salad. You know, it’s like- [chuckles] “What am…” You know, [chuckles] “What is all this stuff, and how am I- you know, how am I trying to, how am I trying to figure this out?”… I would say, too, because we’ve just talked about expected family contribution and need-based financial aid and whatnot, many families’ expected family contributions are higher than the cost of attendance. That does not mean you have to pay the full cost of attendance. That means you should look for colleges that offer merit scholarships. And merit scholarships are just the college’s own money that they offer to attract the students that they, that they want to attract. Um, you don’t get merit scholarships at the Ivy Leagues,
00:31:17,364 [Ann Garcia]
um, but you do get them at most other colleges, as well as most public, um, most public colleges, including, including out-of-state colleges. So, for example, my son attended an out-of-state college, and he got a scholarship that was big enough that it actually cost less than staying in-state would, would have cost.
00:31:37,444 [John Lanza]
Yeah. [clears throat] And it does depend- it, it depends on, uh, yeah, different co- ’cause cer- different, uh, colleges are trying to attract different students from different areas, you know? That’s, uh, that was one of the things I got, uh… It was not the case with, uh, it was, it was much more difficult to get, uh, merit scholar- merit, uh, merit aid from, uh, from University of Washington as, as an example, right?
00:32:01,904 [Ann Garcia]
Yeah.
00:32:02,314 [John Lanza]
Um, whereas one of our daughters applied to out of state to University of Oregon and got merit, merit scholarship. So, um, and it’s also different year to year, student to student, so yeah.
00:32:12,764 [Ann Garcia]
And school to school. I mean, we’re in Oregon. My son applied to two schools. He applied to University of Oregon and University of Arizona. He was not eligible for any merit scholarships at University of Oregon and got a gigantic merit scholarship at University of Arizona.
00:32:25,144 [John Lanza]
Yeah. [chuckles] See, now that seems crazy, [laughing] right?
00:32:29,764 [Ann Garcia]
Yep. [laughing]
00:32:29,944 [John Lanza]
That’s the stuff that seems absolute- that’s the stuff that drives us, as parents, crazy. In fact, so I, I have to ask you this question. I reached a friend of mine, I, I told him that we were having this conversation. He’s right in the thick of things, too, and he said… So he said, uh, we won’t name the school in this case, but one school’s annual cost was, like, 10,000 over, uh, the, the, their EFC. And so he called the student aid department to ask about it, and they didn’t really have a suggestion as to how to fill that gap. And when he pressed them, he said, “Well, the EFC doesn’t really mean anything.” And he’s like, “Well, how true is this? Like, what is the point of the FAFSA if it isn’t reflected in your costs?” I mean, it obviously is, but why would a parent get an answer like this? Do you… Can you-
00:33:14,004 [Ann Garcia]
Yeah
00:33:14,264 [John Lanza]
… [chuckles] shed any light on this, Ann G.?
00:33:15,964 [Ann Garcia]
[chuckles] Well, so colleges are under no obligation to meet financial need that students, that students have, and many of them choose not to. You know, many of them, their operating costs require them to bring in a certain amount of tuition and fee dollars, um, every, every year. Part of the reason why the, why the expected family contribution has been renamed the Student Aid Index is for exactly, exactly that reason. You know-
00:33:44,194 [John Lanza]
Yeah
00:33:44,194 [Ann Garcia]
… people see expected family contribution, they go, “Well, that’s what I’m expected to contribute,” and then they get these award letters that are, that have nothing, you know, nothing to do with that. Um-
00:33:54,264 [John Lanza]
Right.
00:33:54,914 [Ann Garcia]
And so, and so that’s part of the reason for the change. My recommendation to families is always, every college is required to have on its website a tool called a net price calculator, and you can punch in your financial information, um, and sometimes your academic information if it’s a college that offers merit scholarships, and it will tell you what students like you paid to attend that college in, in the current year. The good news is it can only show grant aid, so it can’t show student loans, work study, any of those other pieces. So that can be a really helpful tool going into this process to say… I mean, when we were looking at, um, when we were looking at colleges, my kids each had a budget for college. We did the net price calculators and crossed a lot of schools off of, off of our, our lists, um, because they weren’t gonna come in where we, where we wanted to. If you don’t want to go through the manual process of every individual school’s net price calculator, um, there are two really good websites to look at, um, that, uh, those are College Data and College Navigator. Um, College Data is just collegedata.com. College Navigator is, you just Google College Navigator, and, um, and, and it’ll come up. Each of those websites let you search colleges by name, and they will show you, um, for students who had financial need, what percent of that financial need was actually met. So some colleges will meet 100% of demonstrated need, many don’t. And, um, and so if you are a student with high need, make sure that you apply to colleges that will, that will meet that need. If you’re a student without need, make sure that you apply to colleges that offer merit scholarships.
00:35:40,424 [John Lanza]
Yeah, and, and, uh, what I like in the book is that you talk about both your kids and the process they went through, and obviously, it’s specific to two kids, and everybody’s gonna have different experiences. But, um, but they… And they went to very different schools. One went to a, you know, very expensive private school, and then another one went to, um, a state school, right? And, um, but the fit worked, and the fit worked financially. So but what I really want to get out of here is, it’s clear you had an open conversation about money, um, with your kids. Um, and we did the same thing, um, with our… You know, they knew what, how much was in their 529s and… But what I want to do, since this is The Art of Allowance podcast, is kind of dig- drill down a little deeper. So, like, yeah, you mentioned that you started having… You think it’s a good time to have these conversations in between, in middle school, tween time. Um, but when did you kind of talk to your, start talking to your kids about money in general? And I would love to know, like, did you, when they were younger, did you have some kind of allowance set up? Like, what was your progression in, uh, in terms of, of opening up this conversation about money for your children from, from the, you know, from the time they were born [chuckles] to the time they’re at now?
00:36:53,908 [Ann Garcia]
… Yeah, I mean-
00:36:54,688 [John Lanza]
There’s, there’s a, there’s a tiny little time span that you have-
00:36:57,138 [Ann Garcia]
[laughing]
00:36:57,168 [John Lanza]
-to work with there. [laughing]
00:36:58,848 [Ann Garcia]
Right? Because it… And it was all so easy. [laughing]
00:37:01,748 [John Lanza]
Right.
00:37:02,468 [Ann Garcia]
‘Cause I did not have, I did not have your book. [laughing]
00:37:06,628 [John Lanza]
No, just grab- yeah, I don’t think you needed my book. So grab- just grab any part of that you think would be interesting, um, to share, uh-
00:37:16,128 [Ann Garcia]
Yeah
00:37:16,438 [John Lanza]
… I think, and then we’ll kind of go from there.
00:37:18,348 [Ann Garcia]
So I would say our allowance conversations really kicked off when my kids got to the age where we would go to the store, and they would want something, and I felt like I was being arbitrary about saying yes or about saying yes or no to, to their wants. And so finally I was like, “Oh, this is what allowances are for.” [laughing]
00:37:40,217 [John Lanza]
[laughing]
00:37:40,248 [Ann Garcia]
And they had an allowance, and so then when we went to the store, I was like… And they wanted something, it was like, “Okay, well, you know, you have your allowance. You can choose to spend it on that or not.” One thing that we did do with their allowances, which were, which were meager, um, was they earned 10% interest on their allowance- on the portion of their allowance that they didn’t spend. And so, so there was… Monthly. So, so there was, um, there was an incentive for them not to s- not to spend their allowances. Um, fortunately, they did not have the level of impulse control that would’ve got us into big trouble offering them 10%, um, monthly [laughing] um, monthly interest. But it was enough where they- where if they went a f- you know, went a few weeks without spending their allowance, without spending all of their allowance, and there was some balance left at the end of the month, that got that 10%. That be- that, you know, turned into a number that was, um, helpful and meaningful to them in, um, in, in terms of, of thinking about, um, spending, spending versus, versus savings. Um, I also, as a parent, I always wanted to limit my kids’ allowance to the things I would want them to be able to have. So when they were in high school, I didn’t want them having enough allowance that they could buy an iPad.
00:39:06,808 [John Lanza]
Yeah.
00:39:07,278 [Ann Garcia]
Um, I wanted that to be something, you know, something that they had to, to, to earn. Um, and I remember they ended up my… Uh, they both ended up getting jobs and, you know, getting some birthday money, and they decided to get, um, Kindle Fires instead, uh, when they were, you know, when they were new. And it was kind of shocking to them to learn that since… Although they had purchased this with their own money, since they lived in my house, I was still setting rules about its, about its usage. [laughing]
00:39:34,077 [John Lanza]
[laughing]
00:39:34,268 [Ann Garcia]
So that was- [laughing] so that was another money conversation about, you know, rent and, you know, room and board costs and, and-
00:39:42,608 [John Lanza]
Yeah
00:39:42,828 [Ann Garcia]
… um, and, and how they were, um, how they were earning that. I feel like my kids earn- learned some interesting money lessons, and not, not necessarily from me. This is definitely not a polishing-my-mom-halo, um, moment. But-
00:39:55,697 [John Lanza]
Yeah
00:39:55,728 [Ann Garcia]
… for example, my son got a summer job the summer that he was 14 and earned a whole bunch of money, and he was- it was funny money because he was reffing indoor soccer, and the coaches pay him in- paid him in cash. And so he literally had a drawer full of cash, um, at home, and one day, um, his soccer team all went to, uh, um, all went to a Timbers game, and somebody wanted to buy ice cream, and other kids didn’t have money with them, and he was just like, “You know what? This will be more fun if I just buy ice cream for everyone.” [laughing] And he did, and, and he loved it, and he, you know, he loved that everyone was happy and having ice cream together and, you know, and that, and that he could- he could sort of even out the, um, the edges on, um, on the team because we live in a very socioeconomically diverse, um, community, and, um, and not all of the kids could, could buy ice cream at, um, at a soccer game. And so he loved that he could sort of take that tension away, and he was super happy that his friends were really grateful and happy that, that he had done that. But over time, he started to realize, you know, because he had… He- you know, he kind of had more money than any of his friends, ’cause he had this job, and he wasn’t 16, so he had nothing to [chuckles] you know, nothing to spend money on, that, um, that some people, you know, started to take a- to take advantage of, of that and just to expect, um, you know, expect that when they did things, that he was gonna be the one who would, who would, who would pay for it. You know, on the other hand, he had a friend who, um, who was, was very poor, and they all tried out for the soccer team together, and after they all- they made the team, his friend called him up and said, “I’m not gonna be able to play, ’cause I can’t afford-
00:41:41,568 [John Lanza]
Mm.
00:41:41,598 [Ann Garcia]
… um, I can’t afford the fees.” And, and, and Alex paid for him to play, and-
00:41:46,048 [John Lanza]
Wow. Yeah.
00:41:47,448 [Ann Garcia]
You know, and that was just a really… You know, that was a proud moment for me as a mommy. [laughing]
00:41:53,148 [John Lanza]
Yeah, that, you can pol- you can polish your mom halo, uh, on that one-
00:41:57,008 [Ann Garcia]
[laughing]
00:41:57,648 [John Lanza]
… because, well, it’s just- that’s, that’s such, such a great lesson because it’s, it’s, it’s what you want your kids to learn, is that money is just a tool to be wielded, and that’s what… I mean, that’s just a wonderful way to, uh, to go about that. And, and it’s, it’s interesting because, uh, there, uh, there’s a, a book called Happy Money, and they talk about, you know, h- how money- how you can actually use money to make you hap- happier, right, than-
00:42:21,438 [Ann Garcia]
Mm-hmm
00:42:21,788 [John Lanza]
… there are ways that, that, ways you can use it, and one of those things is spending money on other people really does. So there’s research behind, uh, this, this idea, and, um, I love it. It’s, it’s great that he’s discovered that, and hopefully, that’s something that carries through for the, through the rest of his life, ’cause that’s kind of what we hope for the, in this whole process, is that these are, these are ideas and habits that they kind of take with them, right?
00:42:46,588 [Ann Garcia]
Yeah. You know, on the other hand, when it, you know, when it came to, you know, when it came to college, and I w- tell this story in, in the book, you know, he applied to two schools, um, Arizona and Oregon, and he did early-… um, early action because he had everything ready and was like, “Why, why wait?” Um, early action is non-binding compared with early decision, which is, which is binding. And within 24 hours of submitting his application to, to both schools, he had an acceptance from Arizona. He had a big scholarship package from them. He had, you know, all the hoopla. He got, you know, stickers in the mail from them. You know, “Put one on your phone, put one on your laptop, give some to your friends.” Just this constant drumbeat of marketing and absolute crickets from, from, from Oregon. Um, and he didn’t hear back from, from Oregon until, you know, his status changed on their portal on December 14th, when their, uh, you know, deadline that they were gonna respond was December 15th. And, you know, and he didn’t get the big packet in the mail that everyone puts on Instagram, um, for, for several more, more days. Where, you know, there had been this long time period of getting these great messages from Arizona, and meanwhile, when we saw the two packages, it looked on paper like Arizona was gonna be considerably more expensive, um, than, than Oregon. And, um, and so I, you know, so I was glad that we weren’t bringing up with him for the first time the concept of this is a lot of, a lot of extra, um, a lot of extra money. And because in his mind, [chuckles] you know, one school loved him and the other school didn’t care about him. Um, and, uh, and, and that’s meaningful to a 17-year-old.
00:44:38,652 [John Lanza]
Yeah.
00:44:38,832 [Ann Garcia]
And, um, uh, and, and so, you know, so, so, you know, getting back to your earlier question about deciphering financial aid awards, we tasked him with deciphering his financial aid award and figuring out if he could, if he could close that, that cost gap. And, uh, and he learned some really interesting things. You know, one, he learned that, um, one school had used its lowest housing and meal plan cost, the other had used the highest, and if we looked at where he would actually live at both schools… You know, the original gap was about $7,000. That, that closed about $4,000 of, of the gap. Um, we also learned that one sc- that, that the school that seemed more expensive guaranteed your tuition rate for four years, so we were never gonna pay more than that first year’s cost.
00:45:28,842 [John Lanza]
Mm-hmm.
00:45:28,852 [Ann Garcia]
The other one typically raised tuition about 5 or 6% every year, and so-
00:45:33,572 [John Lanza]
Yeah
00:45:33,812 [Ann Garcia]
… it wasn’t gonna take too long before the second one was gonna be, gonna be more expensive. Um, and, you know, he found out housing was cheaper there, um, in Arizona than in Oregon. He could, was more likely to be hired as an RA in Arizona than in Oregon. Um, so, so, you know, so, so kudos to him. He really took that project on, um, of figuring out how to, how to make this work financially because that was something that he knew was a, was a decision-making criteria for us. And, and ultimately, we learned that the, the college that looked more expensive on paper was actually, was actually cheaper.
00:46:10,272 [John Lanza]
You know, it’s… What’s fastening about- fascinating about this, and it makes me think because, um, ’cause we got- because our daughter got into Oregon, and we got a dr- we got a lot of stuff from Oregon. So I wonder if… And so him being from out of state, um, and it, you know, being better for those colleges, I mean, they had, you know, to get it, they, they, they get more money from the folks who are coming from out of state. I wonder, they, they must be marketing differently. Um, I mean, our, you know, it’s, the, they- because we got a lot from Oregon, so it’s kinda-
00:46:40,112 [Ann Garcia]
Mm-hmm
00:46:40,122 [John Lanza]
… it sound like what we got from Oregon was what you got from Arizona, which is so interesting to me. Whereas, you know, and, and in-state wise was not the same, uh, same type of thing, ’cause they just, I, you know-
00:46:51,512 [Ann Garcia]
They expect you’re gonna go there. [laughing]
00:46:53,252 [John Lanza]
They expect you’re gonna go there, right? You’re gonna do UCSD.
00:46:56,672 [Ann Garcia]
Mm-hmm.
00:46:56,952 [John Lanza]
And, um, and so didn’t, we- there wasn’t a, there wasn’t this, that drumbeat of, uh, that, that we’re talking about. It’s, uh, it’s really, it’s, it’s a fascinating process, and, um, she ultimately did, did, uh, did not end up going to Oregon, but it’s, uh, uh… As you were saying that, I’m just thinking, wow, that’s, uh, the, the way they market is clearly going to be, it sounds like it’s clearly different, um, to the out of state versus the in-state kids.
00:47:24,332 [Ann Garcia]
Yeah.
00:47:24,862 [John Lanza]
Um, again-
00:47:24,872 [Ann Garcia]
Well, my, my daughter had a similar-
00:47:26,342 [John Lanza]
Based on two experiences, so yeah.
00:47:27,792 [Ann Garcia]
Well, my daughter had a similar experience, you know, applying to private colleges. Some of them were just like, “Yeah, we want you, we want you, we want you.” And, you know-
00:47:35,292 [John Lanza]
Yeah
00:47:35,652 [Ann Garcia]
… we got scarves from UChicago. We got, you know, all, all kinds of s- swag. She got invited out, you know, they were- they paid her costs to come to an orientation session. All the other colleges were like, “If you wanna come, sign here.” [laughing]
00:47:51,072 [John Lanza]
Yeah, yeah. Yeah, that’s, that, uh, that’s, [chuckles] that’s true. I mean, that’s, uh, we’ve seen that same thing. It’s, it’s incredible. Thank you, and you, you just, you do, we wanna find those schools that really, uh, that want you. I mean, that, uh-
00:48:03,882 [Ann Garcia]
Mm-hmm
00:48:03,932 [John Lanza]
… that makes sense. Um, I have to ask you, what, go, just going back when you did, when you set up your allowance, ’cause, you know, that’s where we talk, [laughing] we do, uh-
00:48:12,022 [Ann Garcia]
[chuckles]
00:48:12,162 [John Lanza]
… we talk about that. Did you set it up as, uh, did you have a three jar, a three jar system, or did you just have, “Here’s your money, and then we’re gonna pay you for anything you have in a sa- in savings, we’re gonna pay you 10%?” Did you do that in a s- in a, in an account, or did you do that just with cash? How did the… Just-
00:48:30,332 [Ann Garcia]
We, we did it in an account. So we just set up online savings accounts for each of the kids, and with an automatic transfer in, into the account, and then I would ask them, “You know, do you want some money for yourself?” And if they said, “Yeah, I want $5 to have for myself, or $10 for myself,” w- I would show them that I was, you know, logging into the account and taking that $10 out of their account, and then I would hand them, you know, 10, $10, and they could see their account balance go, go down and then-… at the end of every month, we’d look at their account balance, and I’d say, “Okay, you have, um, you know, $12 in your account, so you get $1.20 in interest, and here it comes.” [chuckles]
00:49:13,359 [John Lanza]
Yeah.
00:49:13,439 [Ann Garcia]
You know, and they could, they could see it there.
00:49:16,120 [John Lanza]
So when you went to the store, if they didn’t have cash, did they a- have to ask you to pull from the online account?
00:49:23,480 [Ann Garcia]
Yeah, and I would just, you know, give them-
00:49:26,339 [John Lanza]
Yeah
00:49:26,350 [Ann Garcia]
… w- you know, I, that was my ar- opportunity to be arbitrary
00:49:30,299 [Ann Garcia]
[laughing] and say-
00:49:32,470 [John Lanza]
[laughing]
00:49:32,500 [Ann Garcia]
If it was something I didn’t want them to have, I’d be like: “Oh, that’s too bad you didn’t bring money. Maybe next time.”
00:49:37,689 [John Lanza]
Oh, yeah. [laughing]
00:49:39,348 [Ann Garcia]
[laughing]
00:49:39,379 [John Lanza]
That’s interesting, okay. So, uh-
00:49:41,100 [Ann Garcia]
Oh, a book?
00:49:41,740 [John Lanza]
I, I like how-
00:49:41,980 [Ann Garcia]
Of course. [laughing]
00:49:44,049 [John Lanza]
[chuckles] Well, I like how, how people, uh, kind of approach the, the different ways of doing it, so.
00:49:48,379 [Ann Garcia]
It’s important to retain your right to be arbitrary as a parent.
00:49:52,160 [John Lanza]
[laughing] Yeah, you do have that right, no doubt about it. Um, you know, it’s ’cause w- what we would do is just have… You’d- we just had- we had certain rules that, you know, there are certain things that, I don’t even know what they… Actually, I don’t think they really violated the rules. There would’ve been rules. You know, if they were, decided they wanted to buy, you know, a book that was inappropriate, then we would’ve, you know, put the kibosh on it. That’s a terrible example, like, what inappropriate book are you gonna buy? Uh, but if there was something that we felt was inappropriate, we would’ve said no. Um, but in general, we kinda let them kind of ride, do, do what they did, and, and thinking that, that, you know, when they bought some play set, um, they, that we didn’t think was gonna be very- that they wouldn’t kind of be interested in in a week or two, we kinda let them do that.
00:50:38,680 [Ann Garcia]
Mm-hmm.
00:50:39,020 [John Lanza]
Um, and, you know, the thing about it is, I re- originally, I thought about it, and I thought, you know, that was, it, there’s a certain amount of waste to that. But if they got two weeks of really good use of something, uh, for, you know, $10, you know, aside from the fact that, you know, it ma- it’s potentially is something that’s wasteful, the amount of potential joy they got out of it might have been worthwhile. So it’s not… I was always looking at it as, well, that’s a clear waste. You’ll learn a lesson from it.
00:51:10,379 [Ann Garcia]
Mm-hmm.
00:51:10,410 [John Lanza]
But that’s not really necessarily the way they thought about it. Their, their, their, the way they thought about it was, “Here’s something I purchased, and I’m gonna use it.” And there were things that they bought that they realized that were not useful to them, um, and those were lessons. Um-
00:51:26,000 [Ann Garcia]
Yeah
00:51:26,279 [John Lanza]
… so there’s just kind of different, there’s different approaches, um, ultimately kind of leveraging their experience to kind of hopefully learn, uh, how to use money more effectively for themselves in the future, if that makes sense.
00:51:39,359 [Ann Garcia]
Yeah. Well, that’s why I think it’s so important to, you know, for kids to have some access to money that’s, some age-appropriate access to money, because those lessons are really l- low risk when they learn them at a young age. You know, it was really helpful for my son to learn at a low a, at, at a young age, when costs were low, that, you know, he didn’t wanna bring that much money to a high school football game ’cause he didn’t wanna buy hot dogs for 12 people.
00:52:04,399 [John Lanza]
[chuckles]
00:52:05,479 [Ann Garcia]
Um, rather than, you know, learning at his current age that he doesn’t wanna pay rent for his roommate for a month. [chuckles]
00:52:15,299 [John Lanza]
Yep.
00:52:15,540 [Ann Garcia]
Um, you know, definitely easier to learn that on hot dogs.
00:52:19,799 [John Lanza]
[laughing] And, and it’s good at having, that putting in that, um, you know, putting in that control, “I only have X amount of cash,” is a great way to con- it’s a great way to, to make sure that you don’t make the mistake that you could easily make if you’re in the emotional situation and someone’s begging you for that money. So I- that’s- it sounds like he’s, uh, he’s, he’s already, he’s already garnered some very good money wisdom at a, at an early age, which is terrific.
00:52:46,299 [Ann Garcia]
Well, hopefully-
00:52:46,720 [John Lanza]
Um-
00:52:46,769 [Ann Garcia]
… it carries through ’cause he’s now out on his own. [laughing]
00:52:50,710 [John Lanza]
[chuckles] Well, we’re all… [chuckles] We all have our fingers crossed to some extent on that. But, but either way, you know, those experiences are gonna pay off in, in some way. You know, they’re, they’re, they’re experiences, you know, upon which he can build his, his financial life, so-
00:53:03,520 [Ann Garcia]
Mm-hmm
00:53:03,859 [John Lanza]
… Um, so I wanna ask you a few questions before we get to our fast and fun round, uh, questions here. Anne, I wanna ask you, uh, who was the most influential person in your life when it came, comes to the way that you think about money?
00:53:16,919 [Ann Garcia]
[lips smack] Oh, that’s a good question. So, um, so, uh, can I choose an experience rather than a person?
00:53:23,700 [John Lanza]
You can… Sure, yeah.
00:53:25,180 [Ann Garcia]
[laughing] And I suppose I can, I can attribute some people to it. So when I, um, when I was just out of college, I worked in technology a lot, and I ended up working at Intuit, um, which makes now Mint, but Quicken, TurboTax, QuickBooks, and whatnot. And one of the great things about working at Intuit was we had this, you know, intellectual, analytical framework for looking at how to manage money, and we also talked about people who were using that framework to manage their, their money. Um, and, and, and so it was really, really interesting to see both sides of it. You know, here’s how, in a perfect world, you would manage your money and choose between, you know, saving, investing, spending, um, giving, um, versus here’s what people actually, you know, actually do in their day-to-day lives and seeing them do things really well and, um, a- and, and do things really poorly. But see the actual, you know, the actual life experiences that, um,
00:54:25,759 [Ann Garcia]
that, that go h- go hand in, in hand with, with that, um, was, was very influential to me.
00:54:32,779 [John Lanza]
Great. I like that. Um, I’m not surprised that you give a surprising answer to that ’cause I, I will make a plug for the book because I- what makes, um, what makes, to me, what makes a good book is that you get more s- yeah, as many surprises per page as possible, and you have… ‘Cause, you know, this is information. You can get all this, this type of information, um, you know, in various places on the net, but the way that you present the information is very surprising. You already shared a number of s- very surprising pieces of information. Uh, and I have to, before we go on, ’cause I wanted to mention this before, like, one of the real shocking questions, which I’m gonna be asking everybody, is, did you know what the- what school-… has the most Fortune 500 CEOs? Uh, at least at the, at the time of this writing, what school has produced the more- most Fort [chuckles] Fortune 500 CEOs? And the answer, um, you know, it’s, it was Texas A&M. And-
00:55:31,788 [Ann Garcia]
Mm-hmm
00:55:31,798 [John Lanza]
… uh, I thought that, and I think Penn State, you said, was kind of above, you know, even Penn State was above, say, uh, you know, the Stanfords and the Dartmouths, and I thought that was a good perspective, um, [lips smack] shifter. So, uh, I like, I like- you have lots of that kind of information in the book. So, uh, again, I’m not, I, I, I appreciate the answer that you just gave, and I, I appreciate the, the way that you, um, make the information interesting, uh, for parents in the book.
00:55:59,388 [Ann Garcia]
Well, thank you. Thank you.
00:56:01,488 [John Lanza]
Okay, so what’s one tip, uh, that we didn’t discuss that you feel like parents have to know when it comes to paying for college? Like, anything we didn’t discuss that you feel like, “Uh, I have to at least get this.”
00:56:13,488 [Ann Garcia]
Yeah. So, so, you know, following up on, you know, on your point about, um, you know, the point about Texas A&M and Penn State producing the most Fortune 500, um, 500 CEOs, uh, something I, I would love for parents to understand is that your student’s success in life is more about the experiences they have in college than about the college they choose, um, or that, you know, that you, that you want them to attend. And there’s tons and tons of research out there showing that. One of the best, um, studies is the, um, Gallup-Purdue Index that surveyed adults who are successful in life to try to identify what about their college experience, um, in- informs- informed that success. And what they learned was it had absolutely nothing to do with where they went to college. You know, it wasn’t public versus private, it wasn’t urban versus rural, small versus large, any of those things. It really came down to a set of experiences, and the more of those experiences someone has as a college student, the more likely they were to be successful. [lips smack] And those experiences were feeling like professors cared about them, um, having opportunities to apply what they learned in the classroom to a job or an internship, finding mentors on campus, participating in on-campus activities, um, working on a project that lasted a semester or, or longer. And all of those are available at so many different colleges, at so many different, um, at so many different price points. So the important thing when you’re looking at colleges is not the name that’s gonna be on your diploma, and I think intellectually you could look around your friend circle and your peer circle and, and know that that is true, but, but how your student is going to engage as, as a student at, at this school. And so, for example, you know, my daughter fell in love with her college when we were on a campus tour, and they said… They- we went through the dining hall, and they said, “Every house has an assigned table in the dining hall, and that’s where you sit.” And she said, “Oh, my gosh, no lunch table drama.” [laughing]
00:58:28,478 [John Lanza]
[chuckles] That’s funny.
00:58:30,048 [Ann Garcia]
And, you know, and my son, when he went, you know, he went away to a big school where he really didn’t know anyone, and he said, “Okay, I’m gonna live in the pre-business academic residential community ’cause that’ll help me meet people. I found out I can play intramural sports as a free agent, so I’m gonna sign up for indoor soccer and kickball,” and, and, and, and… Um, and, you know, he had a plan for how he was going to, you know, how he was gonna make friends and how he was gonna, how he was gonna engage. So when you look at colleges, think about how your student
00:59:04,328 [Ann Garcia]
is- how they engage in their current environment, what makes them successful and not, and does the college, does the college offer that? Because ultimately, that’s what’s gonna drive a successful, a successful college experience and a successful launch into adulthood.
00:59:23,028 [John Lanza]
Makes a lot of sense. That idea of leaning into your experience, uh, makes, it makes a ton… Really the case with, uh, almost anything that you do, but-
00:59:31,888 [Ann Garcia]
Mm-hmm
00:59:31,898 [John Lanza]
… certainly the college side, that does.
00:59:33,628 [Ann Garcia]
Even if all you have to do is show up, you still have to show up. [chuckles]
00:59:36,058 [John Lanza]
[chuckles] Right. Yeah, and show up in a meaningful way is, uh, is, is, is gonna lead to, uh, positive outcomes usually. Okay, so Anne, are you ready for our fast and fun round questions?
00:59:48,668 [Ann Garcia]
Yes, and I will try to keep my responses fast and fun. [chuckles]
00:59:52,648 [John Lanza]
Okay, here we go. Uh, what does the term money empowered mean to you?
00:59:59,068 [Ann Garcia]
To me, money empowered is when you are able to use your money to have the life that you wanna have, where it’s not about collecting money but, but about doing things that are meaningful and important to you.
01:00:15,748 [John Lanza]
Makes sense. Okay, so what is the best investment of time or money that you’ve ever spent on your kids?
01:00:23,948 [Ann Garcia]
On my kids? Can I, can I tell a different story? Because my, um, my father-in-law made
01:00:30,528 [Ann Garcia]
the worst financial decision that was the best investment in-
01:00:34,058 [John Lanza]
[chuckles]
01:00:34,058 [Ann Garcia]
… in his family. Um-
01:00:36,048 [John Lanza]
Yeah, please.
01:00:36,458 [Ann Garcia]
He, he’s from Argentina. He’s, um, immigrated here shortly before my, um, before my husband was born, and, um, and was very successful here. He was a physician. Um, but it was very important to him to keep his, his, his American family connected with his Argentine family. And his, um, his and my mother-in-law’s families were both involved in the, um, in the wine business in Argentina. They’re from Mendoza, and they had always just grown grapes and sold them to, to other wineries. And when my father-in-law was 65, he said, “You know, I’ve always dreamed of making wine. I’m 65. If I don’t do it now, I’m, I’m never gonna do it.” And so he and, um, he and my husband’s uncle invested in a winery. Um, and, and part of it was about realizing a lifelong dream, but part of it was building connections between his family-… in the US and his family in Argentina, and, and getting us down there, um, and participating in something, and, you know, having a legacy. He passed away this morning, so-
01:01:43,620 [John Lanza]
Wow. I’m sorry to hear that.
01:01:46,980 [Ann Garcia]
But, but, you know, it was just- it was a wonderful investment in, in joy and in family.
01:01:55,660 [John Lanza]
Well, Anne, I appreciate you sharing that. That’s, uh, it’s a wonderful story, and, uh, an inspiration, and again, um, I’m sorry for your loss.
01:02:04,000 [Ann Garcia]
Thank you.
01:02:09,680 [John Lanza]
So
01:02:11,140 [John Lanza]
what advice, uh, to your kids do you most hope that they will heed?
01:02:17,600 [Ann Garcia]
Oh, my gosh, ’cause we give so much advice to our kids. [laughing]
01:02:21,660 [John Lanza]
[laughing]
01:02:23,220 [Ann Garcia]
I remember when they were going off to college, I’m like: “Do this, do this, do this.”
01:02:26,760 [John Lanza]
[laughing]
01:02:27,450 [Ann Garcia]
“Don’t forget to clean out the lint screen, ’cause nobody does that in the dorm dryers.” Um, and I think that was the one that stuck with them. Um, I would like there to be [laughing] you know, I would like there to be some, some larger lessons. Uh, uh, one- you know, one of the things that I talk with them a lot about is, is that it’s… Life isn’t about money. Life is about figuring out what’s important to you and, and setting yourself up so that you can- so that you can pursue what’s important to you.
01:02:58,160 [John Lanza]
Very nice. And if you could transmit a message that everyone would see, so skywritten, on a billboard, wherever. People tend to use the billboard. I don’t think the skywriting, uh, really resonates, but what would that, uh, what would that billboard say?
01:03:14,640 [Ann Garcia]
I, I think it would say, “Life is about relationships, not about money.”
01:03:21,800 [John Lanza]
Wonderful. Uh, the ultimate compound interest, and, uh, compounding, I should say. And what’s one, uh, parenting and/or money smarts book, uh, podcast, uh, or any media that you go back to or that you gift the most often, um, other now than your own book? [laughing]
01:03:41,209 [Ann Garcia]
[laughing] Yeah, so, so you should all gift my book. [laughing]
01:03:46,749 [John Lanza]
[laughing]
01:03:46,749 [Ann Garcia]
But, um, you know, it’s funny, with my kids having just graduated from college and, you know, their- likewise, their friends all just graduating from college, the book I’ve been giving, um, all of them and their friends is, um, Ramit Sethi’s, uh, I Will Teach You to Be Rich, which-
01:04:01,480 [John Lanza]
Great book
01:04:01,909 [Ann Garcia]
… I think is a fabulous just step-by-step through the building blocks of your adult- of your adult financial life.
01:04:10,180 [John Lanza]
Yeah, that is a great book. Great gift. Um, okay-
01:04:15,340 [Ann Garcia]
Skip the Netflix series. [laughing]
01:04:18,520 [John Lanza]
[laughing] Yeah, I only watched one of those. I have listened to some of his podcasts, which have been interesting. I haven’t-
01:04:23,620 [Ann Garcia]
Mm-hmm
01:04:23,790 [John Lanza]
… uh, only watched, yeah. The book is terrific. Um, so, uh, I wanna ask you, so, uh, how can people find you on social media and the web, and, uh, and how can they get a copy of your book, How to Pay for College?
01:04:40,200 [Ann Garcia]
Yeah, so my book is available from Amazon, bookshop.org, you know, bookstores, bookstores everywhere, How to Pay for College. Um, my website is howtopayforcollege.com, where I’ve got loads and loads of information about, um, about college planning. I also have an online course for that late-stage college planning, you know, really targeted towards families who are- maybe have a, a sophomore, junior, senior in high school and are- and are trying to figure it out. Um, I am College Financial Lady on Instagram and Facebook, and AnneGarciaCFP on Twitter.
01:05:18,480 [John Lanza]
Very nice. I, I noticed that your book is published by Harriman House, which is, uh, the publisher for, uh, the- my gift to a lot of college kids, which is The Psychology of Money, which I’m sure you’ve-
01:05:29,120 [Ann Garcia]
That’s the other one that I- that I give people. [laughing] Had you asked me to name two, that would’ve been the second. [laughing]
01:05:34,950 [John Lanza]
[laughing] Um, so is there any other action that you’d like, uh, people to take that would be, you know, helpful for you?
01:05:44,080 [Ann Garcia]
Um, you know, I, I like people to be helpful for themselves, and so, so I encourage you to, you know, be informed about your budget, be informed about your college choices, um, and make those good choices. The thing that you can do to help me is not have your kids come to me with, um, $80,000 in student loan debt.
01:06:04,920 [John Lanza]
Hear, hear. Well, Anne, this has been a really wonderful conversation. I appreciate your time and your sharing your, uh, wide array of wisdom with us. Thank you again for joining us.
01:06:15,260 [Ann Garcia]
Oh, thank you so much for having me. [upbeat music]
01:06:20,800 [John Lanza]
Well, there’s lots to think about from that conversation. I just wanna leave you with the importance of this question, which is: What is the value of a college education? I’m not posing this question to answer it, uh, because it’s really up for each of us to answer this question for ourselves and for our families, and sure, I discussed with Anne the clear economic benefits of a college education, although those are correlational, not necessarily causal. Still, the massive size of this investment just warrants our taking the time to ponder the question and discuss it, um, with our partners and with our kids. You know, why are we making this investment? Is it for the economic benefits, for the socialization aspect, for the well-rounded education, for the credential, for all of those things? You know, whether you have kids in college, are about to enter college, or kids that are about to enter college, or kids who are years away from it, I hope this episode helps you come up with some answers to these questions. Whatever you do, I hope you take time to enjoy the journey that you’re on with your kids. [upbeat music] I really appreciate you taking your valuable time to listen to this episode. I hope you found it useful. You can find detailed show notes for this and all past episodes at themoneymammals.com. That’s T-H-E-M-O-N-E-Y-M-A-M-M-A-L-S.com. Just click the Podcast and Blog link at the top of our homepage to discover our entire podcast archive, and if you like my work here, please, please leave a rating, or even better, a review on whichever service that you use to stream these podcast episodes. You are part of our money smart movement, and this podcast plays an important role in that movement. Your rating and review will help other people like us find this material. And lastly, if you’d like three ideas to help you raise money smart kids delivered directly to your inbox each week, I think you’ll really love my weekly newsletter. Just click on the little purple circle with the chat icon at themoneymammals.com and select Get Our Newsletter. Of course, please consult with an investment or financial professional before engaging in any decisions that might affect your financial well-being, and until next time, don’t forget to enjoy the journey! [upbeat music]