Don't Spend Your Inheritance

"We're spending our children's inheritance."
~ bumper sticker

Your parents might joke that they are spending your inheritance. They might very well be spending it -- on you.  According to Sallie Mae, 24% of college savers use retirement accounts as college savings vehicles. 

Parents shouldn't tap their retirement savings to put you through school.  Why?  Because your parents will need that money to live on and they are going to need a lot of it. They could live a long, long time. Every dollar they take out for your college education is a dollar they don't have accruing interest to cushion their old age -- and your middle age as a caregiver.

Retirement savings is built on the miracle of compound interest. Compound interest needs time to work, and tapping savings mucks it all up. It reduces interest, which reduces interest, which reduces interest. See the Motley Fool's explanation and illustrations of compound interest.

Prudent scholars don't drain their parents' retirement accounts. 

Further Reading:
"Don't raid an IRA to pay for college" at Investment News
"An Introduction to 529 plans" by the U.S. Securities and Exchange Commission

Mark Twain Would Take Statistics

"There are three kinds of lies: lies, damned lies, and statistics," Mark Twain said.  If you have any hope of being a prudent scholar of life, you'll want to get a handle on the last. 
Some majors -- business, sociology, psychology -- will probably require a course in statistics.  But, if you aren't forced by your program, I recommend forcing yourself and taking a junior-level class, or at the very least a freshman-level class introducing statistical literacy.  Check with your advisor as this might fulfill one of your science and math requirements.

Why do I recommend it?  Like a class in personal finance, this kind of course offers life skills. Open almost any newspaper and you'll see an article that uses statistics in some way. Are they using them correctly?  Maybe. Quite often not. Hence, Mr. Twain's colorful opinion on the matter.

The best website I've found all week is STATS.  Run by statisticians advocating for a more informed use of statistics, STATS looks at the current issues from a quantitative perspective. As an extra public service, STATS examines specific news articles and explains how statistics are being used and misused.

Would Mark Twain have taken Statistics?  What's a better way to understand the rascals who use statistics than to study it in depth?

Personal Finance: A Rewarding Elective

Photo: Alan Cleaver

No matter your major in college, prudent scholars, I recommend one class more than any other: Personal Finance.  Your high school might have required a similar class, but investigate your college's version. It might cover more or give you an important review.  I took the version at Indiana University-Bloomington as an adult with years of financial decisions behind me, but still found the class rewarding.

Most Personal Finance courses will look at the following:

• budgeting
• figuring net worth
• understanding interest rates
• comparing mortgages and car loans
• choosing insurance
• investing for retirement

It's never too early to learn budgeting skills, but some of the other topics might seem abstract your first year or two in college. Don't worry if you have to put it off until your last year of college when the "real world" beckons. This not-too-difficult life skills class is perfect counterpoint to some of the more mentally challenging classes you'll take at that time.

You can usually find Personal Finance in the business course listings, but if you can't, ask your academic advisor or do a search of your university's website.