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The Math Behind Kid’s Education

Summer is a time of transition. Kids wrapping up the school year are looking forward to advancing to the next grade level. Kindergarteners are "promoted" to First Grade. High school senior have their diploma in-hand, ready for the next chapter in their life. For many high school graduates, summer means a transition into the next part of their formal education with some type of post-secondary education such as attending a technical school, college or university.

Post-secondary education costs vary by degree type, program and educational institution. For example, total cost for the one year at Chippewa Valley Technical College "Electrical Power Distribution" program1 is published at $8,680. Annual total cost (tuition, room/board, fees) for the University of Wisconsin Eau Claire undergraduate program2 is posted at $17,464 per year for Wisconsin residents. There are various ways to pay for education costs and these may include federal grants, scholarships, tapping savings or investments, employ – ment income or through student or personal loans. Grants and scholarships are an excellent source of funding along with tapping into education specific investment and savings accounts. We have a culture of borrowing in the United States. The Federal Reserve of St. Louis reports3 there is over $1.7 trillion outstanding student loans as of June 7th 2022. Borrowing, by definition, is paying for something after it is consumed. As a CERTIFIED FINANCIAL PLANNER™ my recommendation is to proactively plan for upcoming expenses, essentially play ouense first. The goals shouldn't be to "try and qualify for a loan" but rather pay for those costs as they are being consumed. After that post-secondary certificate or degree is earned, other financial obligations need to be attended to such as housing, auto and transportation, raising children, and sav –

ing for retirement.

One option to cover post-secondary education costs, while sometimes controversial, is actually having that child work. Per Wisconsin child labor laws, minors must be at least age 14 to be permitted to gain most types of employment. A quick glance of available employment opportunities in the area shows around a $13.33 per hour average wage for a typical part-time job for a minor4. I know of several "kids" making over $20 per hour this summer! The author of this article was trapping pocket gophers for local farmers at $2 per tail at age 10 and stocking groceries at age 14 for $4.25 per hour. Lets take a look at the math. If a child were to work 12 weeks in the summer at 40 hours per week along with 40 weeks during the school year at 10 hours per week, that equals a total income of over $11,700 per year. Perhaps that child is realistically left with $7k-$8k per year after taxes, transportation costs, and using a little of that income for "fun money". With proactive planning, and hard work, that child should graduate high school with adequate resources already banked ready to pay that technical college training or a year or two of tuition at the local college. Continue to work throughout those post-secondary education years for additional income to pay these costs.

While partly a personal and parental decision, the point of this article was to focus on the facts, and the fact that a good portion of post-secondary education costs can be met with some proactive planning as well as picking up a few boxes or cleaning some grease pans over the summer!

Adam Smit is CERTIFIED FINANCIAL PLANNER™ with Adam Smit Investment Management LLC and a registered principal of LPL Financial. This article is for general information only and not intended to provide specific advice or recommendations for any individual. Securities ouered through LPL Financial. Member FINRA/SIPC.

1 – CVTC: Electrical Power Distribution. Retrieved June 8, 2022, from https://www.cvtc.edu/academics/programs/electrical-power-distribution 2 – UWEC: Tuition + Fees. Retrieved June 8, 2022 from https://www.uwec.edu/tuition-financial-aid/tuition-fees/ 3 – FRED Economic Data: St. Louis Fed. Retrieved June 8, 2022 from https://fred.stlouisfed.org/series/SLOAS 4 – Average of $13.33/hour assumed in this calculation which is an average of three part-time published employment opening in the area as of June 8th 2022 (grocery clerk $15/ hour, car washer $12/hour, receptionist $13/hour)

WITH ADAM SMIT

August 3, 2022