Speaker 1 (00:02.082)
Welcome to the Physician Family Financial Advisors Podcast, where physician moms and dads turn today's worries about taxes and investing into all the money you'll need for college and retirement. I am Ben Utley.
And I'm Nate Renneke. Today we are talking about the simple truth about college savings for doctors. Truth. Yes. So Ben, we didn't say the secret, we said the truth.
The simple truth.
Speaker 1 (00:28.418)
Yes, not secret because this is out there. And what is this simple truth?
The simple truth is there really is no secret, there's no tricks. You have to save a ton of money for college. so surprising. No magic tricks over here. Yes, and I get the question a lot about not necessarily that physicians don't know they need to save for this bill.
WHA-
Speaker 1 (00:51.736)
You have to sign for college?
Speaker 2 (01:02.68)
physicians know how expensive college is. Yeah. Right. They got hundreds of thousand dollars in student loans or it was the greatest gift their parents ever gave them to graduate without student loans and they look at all their colleagues and they can't believe they're so lucky that their parents paid for it. Yes. So, but the the interesting thing about when I speak with physicians about saving for college
Dead freedom, baby.
Speaker 2 (01:29.888)
is not that they don't, they do know how how expensive it is, but their perspective on this many times is there's no way it could keep going on like this. That's, that's what they say to me. And while I am, there's part of me that wants to go down that rabbit hole with them because it does seem sort of crazy that physicians have hundreds of thousands of dollars of student debt.
I am here to say, I don't have a crystal ball then, but if the government starts subsidizing college, doctors will be the last group of people to ever see that money.
Amen, brother.
So let's go ahead and assume no one will help you.
No one is coming to the rescue. are on your own in a life raft in the middle of the ocean surrounded by sharks and bursars.
Speaker 2 (02:28.696)
Yes, not even I can help you help yourself, but that's about it.
Let me help you help yourself. Yes.
So we're getting real here. We're not giving you any tips here. This is gonna be the old fashioned. You set a goal, understand how much that goal costs. We look into how the cost of college has risen over the last several years. We watch this goal closely year over year. And you simply try to achieve an achievable goal, which we see physicians every day achieve this goal.
Yes, yes, many, many kids going off to college because of many, diligent savings-filled parents who started very early. So, Nate, enough of the soft pedal talk about the simple truth. Hit me in the gut with this. Tell me, what's this going to cost me?
Okay. So for the audience, forgive me. I will try to make these, this number driven podcast less painful and I'll, and I'll do some rounding. Okay. Nice, easy numbers to digest, but I have come up with some figures for the cost of college and how much you probably need to save assuming you're starting from nothing.
Speaker 1 (03:47.95)
Where'd you get these numbers, Are they secret?
So they're not secret, but they do take quite some heavy math. So I've done the math for you. But the actual cost of college comes from the college board. So they come out with the cost of college every year. They break it down in detail. And it's difficult to get very, very specific on this when I'm talking to a large audience. But what we've done is most physicians
The way that they break this down is, I going to pay for public or am I going to pay for private?
Yes, public versus private is the age old question paper versus plastic.
Yes, and it's not Ivy League. This is the average private. So what I got from the College Board was that public school costs just over $23,000 per year.
Speaker 1 (04:30.626)
Okay.
Speaker 1 (04:44.128)
Okay. That's like a steal to me. Gosh.
Mm-hmm. Yeah, I know it doesn't seem that bad Now when you say that over four years, that's you know, you're knocking on the door of a hundred grand, but right That's where we're at for public Private is more than double that it is about fifty three thousand dollars. Well which King is up there and and if you are in a
older physician that your kids are off to college and you may know this is not the most expensive private school by any stretch of the imagination.
Not even in the top 10. This is the average private.
Cool. So, yes, and if you were a very diligent parent and you just said, you know what, from the day this child's born, I'm gonna start saving. And you invested in a reasonable, you know, we can't really get into specific investments, but if you chose a reasonable investment choice, you would probably need to save about $800 a month, a little more than that.
Speaker 1 (05:26.35)
and we're talking about college here.
Speaker 2 (05:53.454)
for public school.
That is $800 a month. That's a lot of dough.
That is, and that's $1,800 from the first month your child's to the day they step foot on campus.
I want to take a tiny detour here for second, Nate. Okay, so when you said that dollar amount, I was like, what could that buy me? One of the things I thought is, that's like a really high life insurance premium. And I thought about cash value and there are some companies out there, you have some agents who prey on young clueless doctors who are still in training. And sometimes they sell those young clueless doctors. Dun, da, da.
whole life insurance or worse, variable universal life. Reminds me of a couple who came to me, they referred, they were dealing with an insurance agent, I'll say that delicately. And they had this very expensive cash value life insurance policy. Ultimately, they went up giving that to Heave Ho, they bought some term for a very reasonable price. And the difference, the savings difference was enough to be able to send two kids to private college on the erstwhile premium.
Speaker 2 (07:03.468)
Yes. my gosh.
Yes. And everyone who's listening right now, you know which company I'm talking about. You saw those guys when you went through training. You know what I'm talking about. Some of your buddies fell for that and they're, they're, they're in the trap. They need somebody to help them gnaw their leg off so they can get out of it. So that's the end of my side.
Okay, well I'm gonna do one more aside because I a similar thing yesterday. client, it's a little bit, it's a happier story, but they had a big lump sum of money and they said, hey, we hate these student loans, but we're about to have another baby. And I found that if they took that chunk of money, I think it was like a hundred grand and they invested it for college or
they paid off their student loans before they're gonna refinance. It was about the same amount of monthly savings. So if you can pay off your student loans, you could pay for college and vice versa. And you can chunk this off at a time too. You don't have to do this monthly, but you should when you're getting started. And so things will happen, you'll save up some cash, you could put it toward college, you could put it toward those loans, but.
Everything monthly baby, everything monthly. Getting the habit, that culture of savings, that culture of financial security in your household. Nobody's coming to save you. It's going to happen one drop at a time, one paycheck at a time, month by month, chipping away.
Speaker 2 (08:34.222)
Yep. Okay, so for private, if you're saving for private, day that baby's born, you need to save about $1,900 a month. What? Yeah, that's a lot.
What? That's like my brand new mortgage payment on my starter home.
I know, and this isn't medical school, you know, this is an expensive goal.
Nate, I want to have six kids. That's $12,000 a month.
Yep. Expectations need to change, you know, which is essentially to say private school for six kids. Maybe not going to happen. That's a of or, you know, what you're spending your money on needs to change around the house so you can achieve this goal because the alternative. OK, we're going to get into the alternative a little bit later. So put a pin in that. OK, so I'm going to move forward to six year olds and we see this five or six year old
Speaker 2 (09:30.486)
starting to say for college quite a bit with young physicians.
busy, we're broke in the beginning, made babies, had to finish training and now like you're a couple of years out of training, you're looking around you're like, holy cow, my kid's going off to school, school, wait, college, I gotta save for college.
Yes, yes. And when they see the difference between the kind of the six-year-old savings versus their newborn, because a lot of times they'll have another baby at that point, it smacks them in the face. Yeah. So for a six-year-old public school, it's about $1,100. And then private starting to get out of hand is about $2,400. Ooh.
2,400. And we're talking about the second baby here, right? So now we're talking about like five grand. Nate, this can't keep going. This is not sustainable.
I know, that's what we all, I hope it's not, I hope changes happen, but you don't send your kids to college on hope many times.
Speaker 1 (10:32.31)
You don't. You don't. The HOPE Scholarship is not for us doctors. Yes.
Yeah. So last one that I got here for you is a 12 year old and this is sort of depressing. And honestly, at this point, you have to be a little bit careful with just your approach to this. You're getting to the point where you may not even have much. You have a little bit, but much of an investable time horizon here. Yeah. But you're looking at almost, I mean, it's $3,800 for private.
This is getting to the point where it feels like you're just paying out of pocket. Very much so. then public is $16.50.
Yeah.
Speaker 1 (11:18.956)
Yeah, so Nate before we before we break people's spirit here, you know I want to say as a as a parent who's writing those checks right now like literally stroking those five-figure checks Every dollar that you have safer for Excuse me for college every dollar you have safer college is a dollar that you don't have to come up with when your kids actually get into college so if you don't have the perfect savings plan you're not saving all the millions of dollars that Nate's describing here a Simple thing you could do is just get started
So especially if you have young kids just getting started. I remember when I started over 20 years ago saving for college, my first child was born. That month I saved $250. And at that time it seemed like a lot of money to me. know, now very small potatoes. But the sooner you start saving, the better off you're going to be. Because like Nate said, when your kid's 12 years old, you barely have an investable time horizon. It's only six years until your kids go off to school. So when you start earlier,
you can take more risk with your investments than if you start later, right? Because unlike retirement where you can extend the deadline, you're not gonna spend all the money now, college is a drop dead target. You're gonna spend all that money over period of four years, if you're lucky, five or six years. And so the sooner you start, the better off you are.
Yeah. And the, the, want to give some context on why these numbers are so ridiculous. Um, the price of college in recent history, at least has gone up about 7 % per year. if you look at, you know, uh, no specific investments, we're not saying anything, anything specific, but if you look at the market, 7 % like the stock market, 7 % pretty decent return.
So to think that you could even keep up with that would be keeping up with 7 % would not be a bad result. Let's put it that way.
Speaker 1 (13:11.182)
You kind of have to invest, but that assumes that you're investing in something as risky as the stock market for all 18 years, right up until the five minute period before you stroke that check to college. And that's just not good planning, right? You don't want to be aggressively invested right up until the time you need the money. You need a glide path.
I need a glide path. That's right. And so this is why I'm not I'm not trying to throw, you know I'm not trying to make this worse than I've already just made it with these numbers but what I'm trying to say is the way out or the the more obtainable path is Start early because if you do start when your child is a newborn even if it's with a small amount of money You can take a more reasonable glide path. You can be more aggressive when you're 18 years out
compared to when you're six years out. So it is worth carving off a piece of that newfound income for college even though you feel like you're behind in everything.
Yep. Yeah. In the beginning, when your kids are young and they're, still crawling around and wobbling and, know, plenty of this guy and saying burr for bird, right? Uh, that's really the high time to be saving because later on it's, uh, you will feel the pinch. You'll be at a party, you'll be in an event and your buddies, your colleagues will be talking about where their kids are going to college. They'll be talking about, uh, college prep and those, those kinds of things. And you'll feel this, this grip come for you. And you'd be like, Oh,
Wow, we need to get started on that, right? But then it'll be too late. But you're listening to this podcast. Nate has told you the sooner you start, the better off you are. So, now you are clued in. So Nate, just hit me right across the forehead with this. What is the simple truth about Dr. Savin for College?
Speaker 2 (14:59.31)
The simple truth is that this is going to be up to you and you need to get started today.
Gotta save, gotta save, gotta save.
And just not to leave you completely hanging in a minute or two, I'll tell you that 529s are a great way to do this. 529s is a specific account you can use to save and invest for college. And even better is all the money you put into 529 that grows for that 18 years, because you're starting from day one, all that growth in that account, if you use that money for college, comes out tax free.
So I hear a lot of my W-2 physician families, I won't say complain, but sort of complain about how there really isn't huge tax breaks for physicians. And I'm telling you, there may not be a tax break for you today, but you can set yourself up for an enormous tax break 18 years from now. If you invest now and pull that money out for college, it's tax free in what is probably going to be your peak earning year.
Yes.
Speaker 2 (16:07.064)
Right, so you're in your peak earning years during your children's college and you want to pay 40 % to the government before you pay the school? That's just bad planning.
That's terrible. That's terrible. You don't have to be that way.
Yep, so use a 529 and then will you tell them about our what we have at our they can email us and we can kind of give them some tips about how to choose a 529.
Yes, I will say that now. So I recognize that some of you are hearing this stuff for the first time, like 529. So like that's a, what does that mean? You know, I hear about that all the time. How does it work? Some of you are listening to this and going like, yeah, I got a 529. Yeah, you guys are, this is like newbie, newbie hour, know, Ben and Nate, you're boring me. Okay, well, so I have something for both of you. All right. So some doctors have a clue.
about this. Some doctors need to get a clue about this. Okay? So we have put together what we call the Clueless Doctor's Guide to Saving for College. Clueless Doctor's Guide to Saving for College. And you can get that by writing us podcast at physicianfamily.com. So for those of you who have a clue,
Speaker 1 (17:25.878)
You certainly know someone who does not have a clue. It might be someone who has that six year old whose costs have already doubled and you don't want to see it triple. It might be somebody who's new to your clinic. It might be a non-traditional older parent that just had a surprise baby and they need to get on track with this so that they won't be retiring and trying to pay for college at the same time. So if you are in the clued in crowd, tell your friends and neighbors about our
Coolest Doctor's Guide to Saving for College. It's got everything in there you need to kind of get started. It tells you how much you need to be saving for you and your situation. It also gives you some ideas about how to choose the vehicles and how much to save. it may not be the whole enchilada, it might not be the end all be all, but it is something where somebody's going from zero can kind of get up and running, get familiar with the concepts and take some action.
to kind of get started so they won't have that 12 year old kid and be like, oh my gosh, you know, it's, it's, it's coming. It's coming. Yes, it's coming. Yep. So if you want that, just write us at podcast at physicianfamily.com and say, please send me the clueless doctor's guide to saving for college. Well, I think that's all we got today, Nate. Is that right? Okay. So I'm wrapping us up. So if you'd like to be more involved with us, if you want to hear more good things from us,
That's it.
Speaker 1 (18:47.094)
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