Questions About College Loans, Backpacks, Savings for Children, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. College loan fatigue
2. Passive income from cultural stories
3. Choosing different target retirement funds
4. Children’s savings account question
5. Starting over financially in America
6. Backpack for college in fall
7. Safe to buy secondhand electrics
8. Realities of trade school
9. Roth IRA for children?
10. Cheap good kitchen rags
11. Learning chess online
12. Gifts and parenting toward independence

Our summers are often packed with activities. We’ll spend a weekend camping, then a weekend visiting extended family on my side, then a weekend spent visiting extended family on my wife’s side, then our summer vacation, and so on.

The challenge with that kind of schedule is that it hypercompresses my working time. I have to use some very creative ways to find uninterrupted windows of time in which to work.

This is why, this morning, I find myself in a coffee shop. I typically don’t work in coffee shops because I feel obligated to buy coffee, but this is a quiet and sleepy coffee shop that opens really early in the morning. Eventually, I’ll move to the library.

Why not just work at home? The problem with working at home is that everyone is there. My wife and all of my children are busy doing things around the house and all of them tend to ask me questions or tell me things or ask for help. If weeks were “normal” I would not mind, but in order to be able to do these things on the weekends, I need healthy uninterrupted blocks of work, so I generally leave the house and go somewhere nearby to work during the summer.

It took time to really figure this out and a few summers were mighty stressful. It’s well worth it to try different approaches to alleviate issues that cause work stress.

Q1: College loan fatigue

I’m suffering from college loan fatigue. My wife and I have two debts, our mortgage and her $42k college loan. We’ve whittled it down from nearly $70k five years ago and I’m just sick of throwing money at it and feeling like we’re spinning our wheels. At this point, I’m paying off $1000 in principal a month, and the thought of doing it for another 42 months is sickening.

I get quarterly bonuses and stock grants and I’m also sending 50% of those to the loans as well as our tax returns, monetary gifts and money I make selling our old junk. But I can’t help thinking about what good all of this money can do elsewhere. I could easily be making an additional six mortgage payments a year, or maxing out my 401k contribution, or buying index funds…but instead I’m throwing thousands of dollars down a bottomless pit.

I think of what life will be like when I’m not spending over $1000/month on vapor and that keeps me going, but are we doing the right thing dumping our money into this? Should I pay the minimum ($660/month!) for the next five years and invest the rest of the money? I know I’ll feel amazing when this loan is gone, but I’d feel even better watching my investment accounts and financial safety net increase every month.
– Stephen

You’re going to have to address your student loans one way or another. If you pay less now, you’ll be rewarded with having to pay more over the long haul as your loans will accumulate more interest. That’s just a fact of life.

The question you’re really asking is whether or not you’ll end up money ahead by putting money aside for retirement now and paying less on your loans, or paying more on your loans now and waiting on retirement savings.

Here’s the truth: it’s a market timing question. The correct answer to your question won’t be known until the returns of whatever investment you might choose are revealed in the next several years.

The truth is that either choice you make is a good choice because they both revolve around spending less than you earn and saving for the future. If you sit down and look at your net worth calculation, either option is going to cause your net worth to go in a positive direction. One will be pretty steady (the early debt payment), while the other might go off like a rocket or might go in the wrong direction for a bit (the retirement savings).

There is no “best” answer, at least not with the limited information given here. How stable is your career? What investment are you considering? What is the interest on your loans? What is your tax situation like? Those factors might guide you toward one option or the other, but either one is fine. They both end up revolving around spending less than you earn, which is the key to success.

A final note: it’s not worth your time or energy to be so frustrated about this debt. It is a fact of life. Just let it be and instead take pride in eliminating it. Don’t focus on how you think your debt is a “black hole.” If you think of it at all, think of it as payments for the college education you’re utilizing that helped you get the job you have now.

Q2: Passive income from cultural stories

What I’m looking for is an inspiration to create a passive income source. I am a part time stay at home mom of a toddler and originally from [another country].

So I stumbled upon an idea to write simple stories in [my original] language for the kids growing up outside [my home country] – like my daughter.

I believe it will be a good way to keep the kids connected to [the culture and language of their ancestors]. . . Something I want for my own daughter.

My question for you is – What would you recommend ? A book / series of books or a blog ?

Based on what my content is, what do you think will work?

Thank you for your insight on this issue and for all the money saving tips in general.
– Anna

Unless you have connections within the publishing industry, your best bet is to publish your own work online, probably in the form of a blog or a standalone website. From there, you’ll have to take on the effort of getting it linked to by other sites, as that’s the key to getting it to show up in Google searches.

Where should you start? It doesn’t matter which path you choose – your first step should be to simply write out a bunch of the stories. Make sure that you actually have the content first before worrying about how to publish it.

So, here’s what I would do. First, I’d simply write out a bunch of the stories, then I’d go back through them and edit and refine them to the best of my ability. Perhaps you can even have a friend help you with the editing. After that, I’d collect them together on a standalone website. You might be able to find a nice template for this at Squarespace. You may want to include some advertisements on the site to earn money, or leave them off and just focus on presentation. After that, spend some time contacting other websites that might link to yours. Find ones you’d be happy to link to and discuss reciprocal linking, where you link to them and they link to you. This will put you on a great path to having your stories discovered by readers, which is the real goal here.

Q3: Choosing different target retirement funds

I am 25, therefore it would make sense for me to place my funds into a 2050 or 2055 target fund. I noticed that the Vanguard 2060 and 2065 funds are allocated exactly the same and are cheaper. Would it make sense for me to invest in the cheaper 2065 fund and in 15 years transfer the dollars over to another fund? This way I would have more shares available and receive higher dividends. Odds are I will transfer my money into a new fund once I hit certain benchmarks anyway.

Am I right to think about it in this way or is my logic wrong?
– Dennis

I’m not sure what you mean by cheaper. I’m assuming that you mean that the cost per share of Vanguard 2060 is less than the cost per share of Vanguard 2050, and a similar comparison occurs between 2055 and 2065. Thus, by that logic, if you’re seeking dividends, 2060 and 2065 make for a better deal since they have identical yields.

Assuming that you’re planning on making an investment change down the road, perhaps moving your money into different funds, this logic does make some sense. In the short term, before 2050 and 2055 start to transition into more secure investments, 2060 and 2065 are basically identical to them and are slightly better deals. The difference is really small, but it does exist.

For passive investors, I don’t think the difference is enough to worry about. On my back of the envelope math, the difference here is a small fraction of a percentage of annual growth. If you’re in “sit it and forget it” mode, this probably isn’t worth it. If you’re a tinkerer, you can make a little extra here, but it’s on the order of a few dollars on a $10,000 investment.

Q4: Children’s savings account question

Someone gave me a flier about Modern Woodmen’s Dollars and Sense children’s savings account. I’m wondering if ya’ll have any experience with it or can give me any advice on it. I can’t find reviews for it online and would like to know if I should sign up my kids for it or stay far away. The person (I just met them while on vacation) who gave me the flier would earn rewards if I sign up, so I don’t know if I can trust them or not.
– Aimee

For clarity’s sake, Modern Woodmen is a bank that offers a children’s savings account that’s tied to a financial literacy program; this account and program are collectively called Dollars and Sense.

Aside from the financial literacy program, the Dollars and Sense savings account seems to be a pretty typical brick and mortar savings account. The interest rate isn’t spectacular, but the account does have a very low minimum balance (appropriate for a child’s account).

For a child learning about savings, this seems completely appropriate.

It does seem to be marketed with some kind of affiliate program, as you mention, but the product itself is a pretty standard children’s savings account with a literacy program attached to it. If this seems right for you, then I’d have no objection to signing up.

Q5: Starting over financially in America

I am a Chilean citizen and I am travelling the next month to the United States. I am interested in opening a checking account for a fresh start. Normally I live in Chile but I have some family with addresses in the United States. Would this be possible?
– Hector

I’m assuming that, while you may be beginning the path to US citizenship, you aren’t a citizen yet and it won’t be coming any time soon. I’m also assuming that you don’t yet have a Social Security number.

Given that, your best bet is to try opening an account that also operates in Chile. I was able to easily discover that JP Morgan Chase and Wells Fargo both operate in Chile.

Both of those banks should be able to help you open an account that you can access in both the United States and Chile. That, to me, is the big advantage of using a large transnational bank.

Q6: Backpack for college in fall

My nephew is going to a great college in the fall. I am going to take him out to lunch a few days before he leaves and want to give him a backpack with some college goodies in it. I want to give him a sturdy back pack and have a $100 budget. What should I buy?
– Nadine

At this point, there are backpacks that range anywhere from $20 to $300; while in general you get what you pay for, there are definitely better ones in each price range.

At around $100, I would buy him a North Face Surge, honestly. I have been using this exact backpack as a portable office for several years now, carrying it back and forth to the library or the park two or three times a week, and it looks practically new. The stitching and materials appear to be quite strong.

I’d really enjoy a list of what you’re putting into the backpack, as would my readers!

Q7: Safe to buy secondhand electrics

Is it safe to buy an electrical device secondhand? What about electronics? I have visions of secondhand devices shorting out and burning down my house!
– Kourtney

We have a ton of secondhand electrical and electronic devices in our home. We have a used bread making machine (costing a whopping $0). We have a couple of used lamps. We have a used stand mixer. Those were just ones I could think of quickly.

None of them have shorted out. None of them have failed to work.

Here’s the thing to remember: any electric or electronic device runs some risk of shorting out. You should never plug in anything new and walk away from it. Instead, you should spend at least some time near it keeping an eye on it to ensure it’s in working order and, over time, trust that the item will work. I don’t plug anything in for the first time and just leave it plugged in while I leave, whether it’s new or not.

If you do that, then there’s really no issue with a used item. I suppose there’s some additional chance of a defect, but you can simply ask to plug the item in at the store to see that it works. Don’t forget, there’s also a chance of a defect in a new and unused item. Be smart with both types of items.

Q8: Realities of trade school

A few times, you have suggested that trade school is a good option for people who recognize that they are not cut out for college. That may be the case but you cannot refute that many trades earn less than many college degrees can earn over a lifetime. I think trades are bad advice.
– Wade

If you’re looking at a trade – let’s say electrician, because that’s the trade I’m most familiar with – the “college” experience is best paralleled by a combination of trade school and apprenticeship. Most electrician schools cost about $1,000 and get you to your apprenticeship in about three months, during which you work for about four years and earn somewhere around $15 an hour. After that, you typically test to become a journeyman electrician. A journeyman electrician makes an average of $56,000 a year nationwide, and there are definitely progression paths within that field, such as working toward master electrician status.

Compare that to a college degree. With an electrician’s path, they pay $1,000 for the brief schooling and then work a $15 per hour job for four years. With a typical four year degree at, say, a typical large state college where the student is in-state, that person is paying about $40,000 for tuition and fees. If they’re not also working enough to feed and house themselves at another job, that’s an additional cost. At the end of college, that’s a substantial debt load. Will that degree be earning more than the $56K average of a journeyman electrician? Maybe, but they’re also carrying a debt load.

I think that a trade like electrical work is a perfectly good alternative to college. It may not be the most exciting career choice, but it doesn’t involve a big debt load and replaces classroom time with apprentice time.

Q9: Roth IRA for children?

Does it make sense to fund a Roth IRA for your child? Can you do that? My back of the envelope math says that if you put money into a Roth IRA for your kid in early childhood for a few years they basically won’t have to save much at all for retirement. Thoughts?
– Alfred

A child can have a Roth IRA as long as he or she has earned income from a job. That’s the tricky part – how can a child earn an income?

Unless you’re in an exceptional situation, with a child working as a model or actor, you’re probably going to have to wait until the teen years to start contributing. However, when your child starts to earn money from tasks like babysitting, as long as they report an income to the IRS, they can contribute as much as they earn up to the $5,500 limit. You can, of course, gift them that much money and manage the IRA contributions yourself.

So, let’s say you have a child that earns $3,000 from babysitting in a year when they’re 14 and you put $3,000 into their Roth IRA. That’s going to give them 51 years of growth – that’s almost $100,000 that will be in their Roth IRA at age 65.

What you might want to consider is simply opening up a savings account in your child’s name and quietly putting in “contributions” into that account. Then, when the child starts earning income, start moving that money into a Roth IRA for them quietly.

Q10: Cheap good kitchen rags

What’s the cheapest way to get a bunch of good kitchen rags for mopping up spills and washing dishes?
– Carla

This 50 pack of Simple Houseware microfiber cleaning cloths is a good start. You can just fill up a drawer with them, use them as needed, and then toss them into most laundry loads. We have a bunch of these and they work like a champ.

You can obviously shop around for similar bundles. Warehouse clubs like Costco and Sam’s Club will have similar bundles available on the shelves so you can judge the quality yourself.

For outdoor rags, I mostly use old t-shirts that I keep in a “rag bag” in the garage. They’re great for outdoor cleaning tasks of all kinds – windows, bicycles, siding, and so on.

Q11: Learning chess online

My six year old is interested in learning how to play chess. There is a teacher at her school that encourages play as an activity in the classroom and on recess rainy days. My daughter is good but wants to get better. She is already as good as I am!

What are the best free tools for learning chess online? It seems like there are a lot of options. Any recommendations?
– David

Honestly, I’m in a very similar boat with my seven year old. We’re learning chess together. I used to play a lot, but I haven’t touched a chess board in a long while.

What we’ve been doing – and this may or may not work for you – is using, which is free. We’ll sometimes play on it together and sometimes I’ll play on my own. The big goal for me is to learn a concept well and then spend time teaching it to him so that he can use it on me.

Right now, either one of us can crush everyone else in our family, so we’re on a bit of a learning journey together. That’s how we’re doing it and the journey has been quite fun.

Q12: Gifts and parenting toward independence

Really loved your article on parenting toward independence! You are so right that parents need to raise their children for strong independence for the sake of their own retirement and future because dependent adult children are a disaster for retirement. I have witnessed this myself as my mom’s two younger siblings are still dependent on my grandparents who are now in their 70s and still working.

How do you handle gift-giving occasions if you parent in this style? It seems to me like handing them a lot of gifts is a bad idea but giving them nothing seems wrong, too.
– Olivia

Our approach is to give our children project-based and creativity-based gifts, usually oriented toward their hobbies.

For example, for our daughter, we typically give her some art supplies depending on what she’s specifically into at the moment. She has worn full sets of colored pencils completely down to nothingness and tends to go through sketchbooks at a surprisingly rapid pace, so those make for good gifts. Art books are also great, as she’ll often sit on the couch cross-legged and just stare at them.

We often give books as gifts as well, particularly ones that we know will push them a little but are intriguing enough to them that they’ll actually read them. For example, we recently gave our oldest child Rules for a Knight by Ethan Hawke as a gift, which is basically the principles of stoicism written in the form of a low fantasy story. He really enjoyed it.

Other gifts include journals, strategic games (ones where thought is required), and anything that will get them outside. We also sometimes give them “experience” gifts as well, often centered around their birthday, such as a camping trip with their friends.

We just look at our gifts through the lens of encouraging independence, problem solving, creativity, going outdoors, and enjoyment of pre-existing hobbies (as much as possible).

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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