Is sending your kids to private school worth your retirement?
Depending on the quality of schools in your area and the interests of your child, a private school might be the best choice for your family.
Private schools often offer more personalized academics, higher standards of conduct, or a religious atmosphere that you may wish to have your child surrounded.
But many private schools come with a rather hefty price tag.
For some families, private school is a price they’re willing to pay in order to get the best experience for their children. But for others, a private school can become more of a financial burden than it’s worth.
Welcome, the “Smith” Family
Mr. Bean was recently at work when a coworker began complaining about the cost of his kids’ schooling.
Like most parents, they’ve always tried to do everything right by their kids:
- They moved way out to the suburbs to be able to afford a house with a yard when their kids were young.
- Both kids have always been involved in a ton of extracurricular activities to “build their budding minds.”
- And now, for the last few years, both kids have been enrolled in 2 of the “Best” private high schools on the island.
Even after financial aid gives them 50% off tuition, they still spend over $25,000 a year on private school tuition alone. This does not include books, activities, sports, and all the other expenses that go along with high school.
For this dual-income family bringing in about $120,000 a year, school tuition alone is eating up 1/5th of their total gross income!
Smith Family’s “Ideal” Spending
If you take all the “recommended” financial averages you hear in the personal finance world into consideration:
- The “safe” portion of income to spend on housing is 25%
- An “average” tax bill of their household income is about 22%
- And the minimum recommended retirement contributions would be 15%
This is what the Smith’s Ideal Income Distribution would look like:
“Smith Family” Ideal Income Distribution | |||
Total Gross Salary | $120,000 | ||
Tax 22% | $120,000 | 22% | $26,400 |
Housing 25% | $120,000 | 25% | $30,000 |
Tuition 21% | $120,000 | 21% | $25,000 |
Retirement Investing | $120,000 | 15% | $18,000 |
Total Left for Savings & Investing, Household Expenses, School Activities, and Living | $20,600 |
While this may be the “ideal” financial setup for a family with private school tuition, I don’t know many families, living in Hawaii, with 2 active, growing teenagers that can handle spending less than $2,000 a month for ALL other expenses. Groceries alone can be almost this much! (Teens can EAT!)
More often than not, what often falls off to the wayside in order to pay for a child’s tuition? Retirement Savings and Investing.
“Smith Family” Actual Income Distribution | |||
Taxes 22% | $120,000 | 22% | $26,400 |
Housing 30% | $120,000 | 30% | $36,000 |
Tuition 21% | $120,000 | 21% | $25,200 |
Retirement 0% | $120,000 | 0% | $0 |
Total Left | $32,400 |
In order to squeeze a few extra hundred dollars out of the monthly budget, parents often put off saving for their retirement in order to cover private school tuition. They figure they can always just save up for retirement after the kids have grown and left the nest. (Late Start Retirement)
So is private school tuition worth it?
What are the Benefits of Private School?
For many, private school offers academics and opportunities that the public schools in their area may not.
- Advanced Calculus!
- AP English!
- Computer Science!
- Even a Nationwide Recognized Football Team!
For others, the draw of private schools might be the religious aspects or higher standards for students and teachers alike.
Some neighborhoods might be downright dangerous, private schools could be the only safe option.
And for some alumni families, the simple prestige of the school may be a draw for future opportunities.
There are a lot of reasons families choose to send their kids to private school, and all of them are legitimate.
But if tuition costs start to become a financial burden on your family, it might be time to look into other ways to achieve these benefits.
Can These Benefits be Attained in Other Ways?
We all want what’s best for our kids, but sometimes we put so much pressure on ourselves, and them, to succeed, we forget that there may be other options out there.
Do they need to attend the top school?
There are a ton of private school options out there. Instead of sending your kid to the top school for $25,000 a year, maybe you could “settle” for the 3rd best school and save an extra $10,000 a year.
Whether it’s actually lower-priced or just has more financial aid to offer, choosing an “almost best” school can make a huge difference in your pocketbook. And they usually offer pretty similar classes/environments.
Can they attend advanced classes somewhere else?
Here in Hawaii, there are many high schools that work with the community colleges in the area to provide dual enrollment.
Instead of just taking AP classes in their high school, students are able to attend a few classes on a college campus. They not only take college-level classes, but they are able to earn credit for both high school and college at the same time! This saves money and time should your student continue onto college. (How to Pay For College Debt Free)
Can you move?
Some neighborhood schools are legitimately scary. Or just plain suck! I get it.
Moving to a better school district can be a very big deal, but if it makes the difference between needing to send your kid to a pricy private school just to feel safe and packing up and moving, it might be worth it.
Another option may be to get a district exception. Depending on the area, DEs can be super easy to get or require a long waitlist. Just ask the public school you would prefer your kid to attend.
What About Homeschool?
In the lockdown years of Covid, many families have discovered they actually like homeschooling their kids. We have for the last 6 years!
If your work schedule/home life permits it and it feels like the right choice for your family, go for it. There are so many opportunities!
Is Private School Worth Your Retirement?
I play with an investment calculator all the time, I love seeing how much money invested today can become, if invested, in the future.
After entering the tuition costs of the Smith family for 4 years of high school and investing it instead, these 45-year-old parents could have over $585,000 by the time they turn 65. That’s just from the $100,000 they spent over 4 years of high school!
If you were to use the 4% rule of thumb for retirement withdrawals, that would give them just over $20,000 a year for their entire retirement! That’s almost as much as they were spending on tuition.
Is private school tuition worth it for your family?
It totally depends on your situation.
- Does your family make enough money every year to keep tuition costs to a reasonable percentage of your income? If yes, great! But if tuition would really make life hard, it might be worth it to look at other options.
- Are you already CoastFI? If you have enough saved for retirement already to be financially stable in your later years, go for it! Spend the money where you value it most! But if you are still far away from your retirement goals, you’ll have to do the math to figure out what makes sense.
Why Am I More Concerned About Your Future Retirement Than Sending Your Child to Private School?
Life comes at us fast.
Immediate costs and goals tend to push their way to the front of our minds. The future is so far away, that we often see our future self as a totally different person. “They can figure things out when the time comes.”
But your future self really is you! When you reach 70 years old, wouldn’t you be happy to know that younger you took care to provide for you? Not many 70-year-olds want to figure it out and work as a Walmart greeter?
We all want what’s best for our kids, but a lot of times, a financially secure parent in their adulthood is much more valuable to a child than a fancy private school experience in their childhood.
Kids can gain experience and build connections in other ways. (Free and Low-Cost Activities) Private schools are not the only way our kids can become successful. With access to the internet, anyone can learn anything or meet anyone.
The last thing I want is to become a burden to my kids in my later years. I want to be able to financially provide for myself, without relying on them to pay for me or end up eating cat food.
Wrap-Up
If you’ve been contemplating sending your kids to private school, simply do the math.
Can your family actually afford it? Are there other options to get a similar education? If you can, great! If not, feel free to look at other options.
Figure out what’s best for YOUR family and leave all the societal pressures and expectations out of the equation.
What do you think? How has private school affected you or your family? Was it worth it or did you find other opportunities for less?
Leave a comment below and let us know!
Love your concepts here. I see this so much. I’m adding this one to my Fawcett’s Favorites next Monday.
Dr. Cory S. Fawcett
Financial Success MD
Aw, thank you so much!