“It vexes me greatly that you should have found me in need, and… that having to earn my living has forced me to interrupt my work and to attend to lesser matters instead of following up the work which your Lordship entrusted me.” Leonardo Da Vinci
I’m reading “Leonardo’s Brain: Understanding Da Vinci’s Creative Genius” by Leonard Shlain and was fascinated to learn that one of the greatest artists in the history of the world had to continually interrupt his art to make money. The reason why this sentence in the book jumped out at me is that my oldest daughter is in high school and is in the process of thinking about college and her future.
We recently had a long conversation about her future, in which, I suggested she engineer her life so that she never needed to work for money. The day after this conversation, I read Da Vinci’s quote.
This word causes so much misery in our lives.
The choices our children make during their high school years may have a very big impact on the rest of their lives. In fact, these choices may create a need for money that forces them to work, just like Leonardo Da Vinci was forced to do.
You see, if she goes to an expensive college and ends up with student loans, she’ll be forced to work upon graduation to make the monthly student loan payments. These student loans will begin to impact her options in life. She may feel pressure to take a certain job just to be able to make the loan payments. Once in this particular job, her choices narrow further because she’ll be trapped in this work-payment cycle.
Because a portion of her income from her work will now be used to pay the student loans, she won’t be able to save a great deal of money. At some point, she’ll probably want to buy a home and won’t be able to pay cash. Now she’ll have a monthly mortgage payment and will need even more money.
Leonardo Da Vinci ended up having to take a job working for a corrupt ruler he completely disagreed with simply to make money to live.
“It is another of the paradoxes of Leonardo’s life that a man who called warfare una pazzia betialissima (a most bestial folly) and detested violence would end up on the payroll of such an unscrupulous and violent person. It is a measure of how badly Leonardo needed the money…”
This must have been extremely challenging for him to do and his need for money must have been significant.
How do we help our children avoid this situation of “need” in their lives?
Is it possible to help them design their lives to reduce, or eliminate, the need for money?
When my daughter was very young, we started using rental income as a college savings fund. The idea was to have enough saved so she could attend a state school without needing student loans. During my long talk with her, I explained a few of the options she could consider. These options were:
1. Use the college savings and go to a state school hopefully graduating with zero debt. She would need a job to pay for her rent, utilities, insurance, car expenses, and food after graduation.
2. Use the college savings and student loans to go to an expensive private school. After graduation she would need a job quickly in order to pay for her rent, utilities, insurance, car expenses, food, and her student loans.
3. Don’t go to college full-time. Keep the college savings plan in place allowing it to compound for years to come. Instead of going to college full-time, she could take specific classes that interested her as a non-degreed student. She could get a full-time job, a part-time job, start a business, or do whatever she wanted following her own interests. She would have to pay for her rent, utilities, insurance, car expenses and food. She would have a some flexibility if she kept these expenses low. Her college savings would make her a millionaire in her 40s if left untouched through the magic of compound interest.
4. Use the college funds to buy a single-family home. Rent this home out to a great family and then use the rental income to pay for her college. Depending on the college she selected, she may be able to graduate without any student loans. If she did end up with student loans at graduation, the rental income from her rental property could help cover these monthly payments. She would still need a job after graduation to pay for her rent, utilities, insurance, car expenses and food.
5. Spend the college savings and skip college. (Not going to happen.)
Each of these choices bring profound differences in her future. Any choice today that leads to her having to make monthly payments in the future creates a need for money. This need for money will ultimately force her to work in the future just as Da Vinci’s need for money forced him to work.
Some say college isn’t worth it anymore. I believe college is valuable on several levels. College will bring new friends, a network of contacts, stronger social skills, incredible mentors through the professors she meets in her classes, and all of the benefits of a college degree.
My hope is that she’ll select option number 4 and attend a less expensive state school. She’ll use her college savings to buy a rental home. She’ll rent this home out and have the tenants pay for her college through their monthly rental payment. When she graduates, she can keep the home as rental and will enjoy monthly passive income for life. Or she can move into the home herself and not have to worry about making a monthly mortgage payment. In other words, use the college savings strategically pay for college and to also reduce her future need for money at the same time.
If she uses the college savings to pay for college directly as most do, she’ll have a need for more money upon graduation. She is going to have to live somewhere and this roof over her head will require a monthly rent, or mortgage payment.
Monthly Payments = Monthly Need
By acquiring a rental property for cash using her college savings and then using the rental income to pay for college, she may have a lot more future freedom as her need for money will be reduced dramatically. She will hopefully have a college degree, which is obviously an asset. She can choose to get a full-time job, or a part-time job. She can start a business, or not start a business. She can travel, or not travel.
She will be in the “_____ You” position described here.
The choices we make between the ages of 17 and 22 seem to be some of the most important life choices. However, we don’t typically “see” this because we’re not thinking long-term.
You can see how to use dividend real estate to pay for college here.