Parents’ commitment to saving money for a child’s college education may cause us to downplay the importance of early childhood education.
The D.C. public school lottery enrollment period for next year opened a few weeks ago. Our family has until early March to determine which public school(s) we would like our kids to attend. We’ve enthusiastically participated in D.C.’s free pre-kindergarten option the past two years. Now we’re focused on a long-term, seemingly high-stakes decision. Specifically, what’s the best environment for our kids during kindergarten and the grades that follow?
The (Financial) Trouble With Saying ‘Yes’
Our kids are far too young to weigh in on the financial dynamics that come with our family’s child care and housing decisions. As a result, I imagine that selecting high schools and colleges will be the first major financial decisions in which they’re fully involved. The personal bias that they bring to the discussion very well may conflict with our family’s financial realities. In the case of high school, they may want to follow their friends. For college, they may argue for a university with a high amount of prestige.
Parents in these situations often hesitate to tell their children “no.” We certainly don’t want to disappoint our kids, especially if they offer a reasonable rationale for their preference. We also continue to place significant emphasis on the reputation of the schools involved. After all, these are the schools that appear on the top of our childrens’ resumes. These are the alumni networks we hope our kids will tap for years to come when they’re job searching. Ultimately, we feel like bad parents if we don’t send our kids to the Best Possible School according to popular opinion.
The Student Loan Debt Lens
We now anticipate this scenario before our children are even born. Any parent who has young children or is preparing to have a child in the near future has watched college costs soar over the past few decades. In fact, many young parents are still paying off student loan debt. And they very badly want to avoid a similar fate for their kids.
Taken together, we now focus on and stress about how to save for college from the first possible opportunity. We certainly have good intentions. And saving early maximizes the benefits that compounding investment growth offers. Yet, our commitment to education during a child’s early adult years may cause us to downplay the importance of early childhood education.
The Research on Education
Research shows that investing in early childhood education produces substantial returns. In a 2013 New York Times op-ed, John E. Pepper Jr. and James M. Zimmerman wrote:
“The Institute for a Competitive Workforce, an affiliate of the United States Chamber of Commerce, found in a 2010 report that ‘for every dollar invested today, savings range from $2.50 to as much as $17 in the years ahead.” Research by the University of Chicago economist James J. Heckman, points to a 7- to 10-percent annual return on investment in high-quality preschool.”
More parents now understand that child development hinges on engaging with your baby early and often in life. Talking, reading, and singing all prepare a child to excel in school later in life. It’s more difficult, however, for a parent to connect early childhood education with that child’s adult job prospects and future earnings.
Conversations About What to Save for College
The Millennial couples I work with who have a baby on the way or an infant at home often ask me about how to save for college. Typically, I first hear about paying off student loan debt. Then the clients might ask about saving for a down payment and catching up on retirement plan contributions. From there, I’ll often hear about investing in a 529 plan and the high cost of child care.
But I have never received a question about paying a higher rent to live within a better city school boundary. I also haven’t had a client ask about the arguments for and against paying for a private elementary school. Nor have I had a conversation about spending extra money on language or math enrichment activities.
A Balance Between Emotions & Evidence
Money is rarely misspent when it’s spent on something you highly value, like a good college. It’s also hard to consider a financial decision problematic when it’s invested (as in a 529 plan) as part of a low-cost, well-diversified portfolio. Even so, we all can benefit from new, evidence-based information that allows us to better understand our financial trade-offs.
I certainly can’t be sure that I’ll act any differently as a parent when we need to make high school and college decisions. I’ll want my kids to be happy and well-positioned for the future, so I may compromise if they push for a particular option. At the very least, though, I try to remind myself to place a high value on education spending right now.
Kevin Mahoney, CFP® is the founder & CEO of Illumint, an independent firm in Washington, DC that offers financial planning for Millennial parents. He specializes in navigating the new financial decisions that arise during our 30s and early 40s, such as repaying student loans, buying a house, saving for college, & investing for the future. In addition, Kevin also leads a financial wellness benefits program for Millennial employees around the country, including group speaking engagements.