Thinking about preparing for your kid's future in terms of specific financial tools may not be the best approach. Instead, consider how you can create opportunities for them in the future by establishing an opportunity fund. Avoid pigeonholing this fund into a specific tool, as there are numerous financial vehicles available.
One of my favorite episodes features the insightful Mitchell Earl. We have a wealth of topics to cover, from his background with Praxis and the disruption of the traditional college education system, to the pitfalls of 529 plans. Mitchell is one of my favorite people to talk to, so welcome back to the show, Mitchell.
Mitchell is the COO of Praxis, a year-long apprenticeship program for enterprising young adults looking for alternatives to traditional college. Praxis aims to provide practical pathways for these individuals who want more control over their futures without the burden of debt. Our discussion delves into examining the efficiency of traditional college routes and how certain paths may not offer the best returns.
We discuss the importance of being intentional when planning your life and career, particularly when considering the opportunity costs tied with college education. It's crucial to evaluate whether the traditional college route aligns with one's goals and if it truly offers a return on investment that justifies the time and resources spent.
Mitchell mentions that although student debt can be an efficient means of financing education, it's vital to understand the implications and to know exactly what you want from it. The discussions highlight the dangers of plan lock � the more investment you make in a given path, the harder it can be to pivot if you decide to change course. This can apply particularly to fields like medicine where the educational journey can span many years and significant debt.
When considering the future of college education, we anticipate a shift with more options and alternatives available to young adults. With rising tuition costs and an oversaturated traditional education model, it's likely that colleges with low quality and high prices might see a decline in enrollment. Meanwhile, institutions that offer a clear and valuable educational signal, such as Ivy League schools, may still demand a premium.
529 plans, often touted as a tax-advantaged way to save for college, come with a series of limitations and potential drawbacks. These plans may not allow for the flexibility needed if your kid decides against traditional college education. Money in these plans, if not used for qualified education expenses, could be subject to taxes and penalties.
It's crucial to understand the nuances of 529 plans, including the ability to withdraw contributions tax-free for non-qualified expenses, although the gains might incur taxes and penalties. Moreover, having substantial assets in a 529 plan could affect your child's financial aid eligibility by increasing their perceived ability to pay.
The key takeaway is to maintain flexibility and control over your finances by not locking into a specific education savings tool. Explore alternatives like whole life insurance or real estate investments which can be used more flexibly to build an opportunity fund for your child's future.
If you're interested in exploring more about Mitchell Earl and Praxis, or if you have inquiries about alternative education paths, feel free to reach out to him at Mitchell@discoverpraxis.com.
Thank you for reading, and remember to always plan with intention and consider the broader spectrum of opportunities when preparing for your child's future.