The Coffee Machine that can Pay for a University Education
Now that readers are starting to fantasize about getting a little bit of this early retirement action for themselves, Mr. Money Mustache is getting many questions about the typical expenses people imagine in their future. One of these is “How will I pay for the University* education of my children”?
I must admit, even as the Dad of a 5-year-old, I don’t do much thinking about how I’ll pay for his education. And I don’t think you need to worry too much either. Why? Because once you grow your Money Mustache a bit, this will seem like a tiny amount of money to you. And as with every other expense in your life, it is in YOUR CONTROL.
How much does a College education cost? Some people get big spirals of fear in their eyes and cry out “Two hundred thousand dollars!!!” Yeah, in the worst case if you pack your kid off to the most prestigious and expensive private university in the country, he never gets a job or scholarship and no financial aid, and you pay for all his rent, clothes, beer, tuition, and books, it is possible to spend this much or more on an education.
But I just looked up some real numbers for my local University of Colorado at Boulder, apparently a pretty fine institution.
University of Colorado at Boulder – ANNUAL COSTS
City: Boulder State: CO In-district tuition: N/A In-state (out-of-district) tuition: $6,446 Out-of-state tuition: $26,700 Fees: $1,486 Room and board: $10,378
Hmm.. What I see is $7932 per year for tuition and fees. If your kid is like I was, and is willing to pay for his own education with no loans, and live at home with the parents for free rent and food to achieve this, he can accomplish this with only 528 hours of paid work (3 months at 15 bucks an hour) per year. In other words, working during the summer as a landscaper or painter already pays for your whole education, debt-free.
That’s the minimum-cost scenario. Now let’s take the maximum cost: out-of-state tuition PLUS room and board. $148,000 for four years.
Let’s say you have a baby right now. You’d like to pay her way in full to Colorado University even though you live in another state. And you don’t want her to ever have to work, or get any scholarships between now and graduation at her 21st birthday. No, you don’t think this will make her grow up to be a spoiled brat with no work ethic, because look, she’s just a cute little baby right now!
You currently work and you and your spouse both like the local Starbucks a bit too much. In fact, you each stop in at the drive-through every day for a coffee and small treat on the way to work. You also stop in on the weekends too. In total, you average $7 each per day** for fancy coffees and the occasional lunch here and there.
You can probably guess how this adds up. This habit, compounded at 7%, adds up to about $148,000 over the 17.5 years from your baby’s birth until she starts university***.
So, just switching to brewing good coffee at home, which I just calculated costs about 10-15 cents per cup if you buy your Organic Fair Trade Espresso roast in 2.5lb bags from your local Costco, will pay for pretty much the whole worst-case education.
And as an MMM reader, you will NOT be incurring a worst-case education cost. Your kid will be a school whiz because you will have time to be home and read with her. She’ll earn money throughout high school, perhaps even doing some advanced assistant work for your own part-time consulting career. And she’ll probably have a Money Mustache of her own going on by age 17, so she will find ways to spend less than the maximum possible amount on her own education. She’ll graduate debt-free and be financially independent before she even has kids of her own at age 30. A permanent repeating family dynasty of happiness and wealth will be born.
At this point, you’ll invite Mr. Money Mustache out for a decadent sushi meal to thank him for changing your lives.
* I’m always torn as to whether to call it “University” as we did in Canada and the rest of the world, or “College” as it tends to be called in the US. I’ll say “College” in this article just since most of the readers are in the US right now and thus it will show up in the search engines more readily.
** I admit that having two people each wasting 7 bucks a day is a bit extreme for me to imagine. But to pay for the in-state tuition equivalent, and still the full ridiculous room-and-board, it’s less than $3.50 a day.
*** Let’s assume that the 7% return is the after-inflation number, as described in “Dude, where’s my 7% investment return“. This accounts for the fact that university tuition will rise with inflation as well… unless we eventually start taking education seriously as a country and bring the cost back down as other advanced countries do.
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Mr. Money Mustache is a family man living in the United States who retired from work, relatively wealthy, at about age 30. After several years of retirement, he noticed that his still-working peers were envious of his lifestyle. They were making more money than he ever had, yet they were somehow still broke. So he decided to write this blog to educate the world on how it is done.
Nice post Mr. Money Mustache! What I have done, here in Canada, is take the cheques that the Canadian Government sends me each month, presumably as a reward for procreating. They send a cheque and I view it as “found money” and put it into an RESP. It works out to about $150 a month, but can be more or less depending on what you make. The government then gives me another 20% of each amount I put in! Plus I earn my return, compounded annually and all that. I figure this way, the Government pays for his whole University Education. If it isn’t enough, he may have to get a job. So there.
Very nice plan! In fact, it might even be TOO generous if you do the math: if it compounds at 7% after inflation, you put in $150/month and the government boosts by 20%, you’ll end up with about $70,000 by the time your youngster is 17. That is a hell of an educational gift!
It is always nice to have a surplus, but if you ever feel strapped for investable money in your own life, you do even have the option of using $50-$100 of those monthly dollars for something else – paying down other debts or investing more for earlier retirement or a more relaxed work schedule during the early childhood years. After all, would your kid rather have way too much money during University, or a bit more time with his parents when learning to read? It is an interesting tradeoff.
Hmm… I don’t have your Ninja math skills, but I didn’t realize it would be that much! Hooray! We don’t really have any other debts (except for our Mortgage) and an undergraduate degree ain’t what it once was. youngster may need to do post-graduate work. So, for now, I’ll stick with it. PS. How did you know how long until my youngster is 17? ; )
Sounds great! You can never go wrong with too much saving, as long as you aren’t compromising your parenting to achieve it.
I think an undergraduate degree is MORE than it used to be. In many fields like my own Engineering one, the meritocratic nature of the Internet and the breaking down of old Suit-and-Tie-and-Pedigree culture is making the degree more of an optional thing. Partly because society and the work world is now changing faster than the educational institutions can keep up.
In Engineering for certain, as well as business, art, music, writing, and who knows what else you can make it to the top without a degree, and having a postgraduate degree is in some case even looked upon as dorky and impractical – even a negative when deciding if a candidate will be an actual achiever in the real world!
I still recommend university educations for everyone who can afford them, but I do like to speak out against the overly expensive assumptions that some people are making. University gets you nice background education, but it is people skills that get you jobs!
My strategy for college savings has been to use the $1,000 child tax credit provided by Uncle Sam. We have 2 kids, and thus get $2,000 each year. After we get our refund, I simply take each kid’s $1k and put it into an UTMA account. I figure by the time they get to college we’ll have roughly $18k for them to use.
From there, I plan on using the strategy my parents did. My sophomore year of high school they told me they had money saved for college, but if I was able to get scholarships to offset my tuition, any leftover money would be mine to keep. It worked well, I made sure to keep my grades up in high school and got a high ACT score that netted me $2,000 scholarship per year.
I must cry foul, you consistently oversimplify in your posts, often by a great margin. This is one of the worst…
Lets say a University education CURRENTLY costs $148k.
You start saving for it now by cutting down on coffee and with a compound interest rate of 7% over 14i’sh years you end up at $148k
Does the University education still cost $148k or is it not subject to the same inflationary factors that gave you your 7% return?
At the same rate it would have risen to $380k (rough calculation), even at half the rate, ie you are achieving double inflation on your savings it is $240k (rough calculation), you are still $90k short.
I am interested in your answer…
Hi Mr. T,
Thanks for the fact-checking. I always enjoy a little constructive criticism. And you don’t have to cry – the investment gains listed in that article, as with all other articles, were already adjusted for inflation. I added a footnote to that effect, just for you.
If you think Mr. Money Mustache’s articles are consistently too simple, you might have to write some more complicated ones on your own blog. I’m writing these things for two reasons: because it’s fun to write them, and because this shit works. The point is teaching you to waste less money, and to illustrate the benefits you get from that in the surprisingly near future. It really is very simple for a moderate-to-upper income person to become rich enough to retire very young, so this blog about it has to be simple too!
Here in Sweden we also get some money from the government to have kids right now it is about 150$ per kid wih a little (about 10%) added if you have more kids. This is the same for all and is not income adjusted as it (in theory) is money for the kid which does not have any income. We put this money into a fund for our kids (now 1 and 3 years old).
This will add up to a fair amount when they turn 18…but I am already thinking about how we can best ‘give’ this money to the kids helping them to get a good start in life but at the same time helping them grow their money mustaches. Any ideas??
I’m sure you will come up with great ideas yourself. My own strategy for my little son is to teach him that money is not an infinite resource, and neither is the Earth.. so each time he wants to buy something (or have something bought for him), he must weigh it against all other possible uses for that money. Having kids feel like they are choosing and purchasing their own toys, rather than just getting them free all the time, helps them appreciate how long it takes to earn something, meaning decisions are made more carefully. If you carry that mentality up through adulthood, you end up free from financial troubles for life.
I should say it is 150$ per kid/per month for 18 years.
I like this a lot. I just hope that universities don’t keep having the exponential increases in tuition that they have the past 10 years or so. A recent graduate from my program (2004) informed me that he was paid only 25% of my current tuition (as of 2011) for the same program.
Also, I’m of the belief not everyone needs (or even wants) a college education. But that’s a whole other topic I believe.
I just calculated the cost of my coffee habit since buying a Nespresso espresso maker and milk heating/frothing device a year and a half ago. At this point in time my coffee costs about $2 per cup (compared to my $5.50 grande soy latte from Starbucks, which I still occasionally indulge in). The coffee pods cost about 0.68 cents each, and they’re aluminum so I can recycle them and compost the used grounds (this requires a bit of work but is worth it – anyone who puts aluminum in the garbage needs a kick in the teeth). The machines were nearly $400 combined. Using a conservative estimate, I have already saved about a thousand bucks by making my own lattes at home, so they have more than paid for themselves. (I tried to factor in that I am most certainly drinking more coffee now than when I had to go to Starbucks for it). It is more than worth it to have a machine that pulls a perfect shot of espresso with little time or effort. Also, it’s healthier – no sugary latte syrups. Vanilla soy milk + a good sprinkle of pumpkin pie spices from the bulk food store = yum!
I realize that I am lagging about 8 months behind here but I had to make sure that others who come across Katies comment are told that Nespresso pods (any coffee pods) are NOT recyclable. Rather than typing out all of the greenwashing of Nespresso I’ll just leave this link.
http://www.coffeehabitat.com/2011/09/nespresso-capsule-recycling/
Making coffee at home is the most efficient way to increase your ‘stash but pod machines are very expensive and require massive amounts of mining to produce the minerals required for the machines and pods. A simple 1 cup pourover can be purchased for $5.
http://www.drugstore.com/products/prod.asp?pid=334612&catid=186078&aid=338666&aparam=334612
The grounds and the nonbleached paper filter can be composted. Earthcrisis averted.
Nespresso pods ARE indeed recyclable.
In the comments in the article you linked to, someone said they had called the big waste management company in North America and confirmed that they do recycle the pods. That company does waste management where I live so I know my pods are being recycled.
I’m so glad you posted the link though; I bought one of those “outpresso” devices that makes the recycling so much easier. Until now I had been opening each capsule with a paring knife, talk about tedious.
Anyway…I’m not going to perish in eco-guilt for using my Nespresso. In addition to the ability to quickly and easily make a perfect shot of espresso, I chose that machine because I can recycle the pods and compost the grounds, and because the machine has energy saving features. I don’t drink drip-coffee, so that single-cup brewing thing you linked to is not gonna do the job. I would bet that my machine uses less energy than brewing espresso traditionally would, because I would have to turn on my stove for that. Just like an electric kettle is more efficient than a stovetop kettle.
Either way, “earthcrisis” has not been averted because coffee is not an eco-friendly thing to consume, period. But if we wanted to have zero impact on the earth, we would have to hang ourselves with fair trade hemp rope and have our bodies eaten by endangered wolves.
I figure I’m balancing out my coffee habit by buying green electricity from my hydro provider, and by never having owned a microwave, TV, or car. I’m not going to feel bad for not being perfect.
Last year I got our coffee at home price down to $.17 per 6 ounce cup. That’s with cream and sugar. Hubby uses a boatload of sugar. We buy Archer Farms decaf at Target for about $8.50lb and the donut shop blend from Aldi at $6lb. These are the cheapest options that we’ve found that taste great. We use a french press. When the coffee is gone, I pour another 1/3 pot of hot water onto the grounds and get some “free” decaf.
I think I’ve had a fancy coffee out 3X in my entire life and that was for roadtrip caffeine purposes. I just can’t see what’s so special about overly sweetened hot bean water that makes it worth $5.
sound analysis here, Mr. MM and let me back it up with our actual numbers as we are in the middle of the process.
Of all the schools that accepted her, our daughter’s choice came down to New York University (55k per year, 220k total) and The University of Rhode Island (37k per year, 148 total).
Said daughter is a school whiz, as you put it, and URI offered her 12k per year.
NYU, being NYU, offered zip.
She is in her second year at URI and loves it. She is a double major in Poly Sci & French. Great opportunities abound. She’ll be spending her junior year studying in France. She’ll come back having most of her Poly Sci credits done and having done them in French.
She has had to turn down an offer from The American University in DC for lack of time and is already in discussion with the US State Department, The UN and The EU regarding internships post France.
So clearly choosing the state school hasn’t limited her options. Meanwhile we are saving 35k per year.
After her scholarships, 25k is the annual out of pocket. 100k total, half what I had planned on.
Wow, cost of living may be high in Ontario but here we clearly have you beat! I paid $5500 per year for my tuition and fees at Trent University. Except I didn’t actually pay that much because I got a scholarship for almost the full amount, which at the time was offered to 2 new students per year and I had to write essays and do interviews to get, but now Trent offers free tuition to any student with a 90% average graduating high school. Of course, people still complain about the cost of tuition around here, and in Quebec, they recently had major student protests about it, even though their tuition is even lower than ours in Ontario.
I used bankrate.com to calculate that saving $50/week for 18 years, at 7%, compounding daily only came to $92,000. So can you explain a little more how you got all the way up to $148,000?
I think the article describes TWO people each spending $7/day or $49/week. So you’d have to plug in $98/week for 18 years to calculate the Starbucks Dividend.
What do you think of parents purchasing a house with a basement apartment for the child to use when they go to University? I was thinking this gives them a certain independence while still saving by living at home.
And then there is still the possibility that in 20 years, everything changed like it did e.g. in Russia from 1985 to 2005. Think about it.
Given that this kind of thing is impossible to plan for, not much point planning for it, is there?
And in that kind of situation, flexibility and skills are probably the most important things to have–attributes which a 30-year cubicle worker probably won’t have as much of as a Mustachian “retiree”.
I am not going to invite you over for sushi because …. I’m vegetarian!
Wait.. Are you telling me that sushi does not count as a vegetable?
I believe colleges only do undergraduate while universities offer undergraduate and graduate degrees. I think you just meant that Americans and Canadians use different terms when they want to refer generically to any institution of higher learning, but I still thought I would mention the difference between the words because having a good vocabulary is both frugal and fun!
In Canada a college refers to a diploma- or certificate-granting institution, where you could get, for example, a Ceramics or Educational Assistant diploma, but not a Bachelor of Education, and university refers to a degree-granting institution, undergraduate or otherwise, where you get B.somethings, M.somethings, and Ph.Ds.
Least expensive way to fund your child’s education? Work for the insitution. I changed jobs, and a side benefit is that my daughter has her basic tuition fully covered. An added benefit is that it is taxable in her hands, not mine. This applies to everyone employed by the University, you don’t have to be faculty. We had already put all the baby bonus money in a mutual fund, so there will now be money left over when she graduates.
I just found your website today and have been reading from the beginning (I realize this is a VERY old post but I assume you’ll still see the response)
It is NOT unreasonable to see couples spending $7 a day at Starbucks, in fact it’s expected that many single people will spend that or more DAILY! It’s incredible (I worked at the bucks for 6 months and have since then moved down the street to an independent coffee shop)
Im not kidding you, we had a regular guy named Stan who was VERY wealthy, come in 2-3 times a DAY and get a modified drink order for himself, his wife and sometimes grand kid along with a pastry. That’s $10-$15 per VISIT with multiple visits a day. The guy paid the “salary” of at least two workers.
Obviously this was our most extreme case but coffee shop “regulars” are a common breed even at my current shop. As a coffee enthusiast at 21 years old, I’m going to have to seriously rethink my approach when i get a new job and can no longer support my habit.
I’m sure someone has pointed this out to you before, but roasting your own coffee is a definitely win financially, *and* flavor wise.
Sweet marias (www.sweetmarias.com) is a pricey site for green coffee, but even there the prices are mostly less than $7/lb. Most Brazils go for a little over $5/lb, and while you *can* purchase some insanely expensive coffees, for the most part it’s all reasonable.
Furthermore, you can be certain that the people who worked to produce the coffee have been fairly paid, even more so than with Fair Trade certified beans. The person in charge of the site has relationships with many of the farmers.
Further-furthermore, if you *don’t* buy from sweet marias you can get coffee even cheaper (although I don’t know how they source their beans). Overall it’s a win.
The initial investment: probably zero. Do you have a hot air popcorn popper? How about a cast iron pan? Heat gun for paint? (Buy a dog bowl).
The skills needed? Do you have *any* of the following:
1. A sense of smell?
2. A sense of sight?
3. A sense of hearing?
I know a blind guy who does it. And while I don’t know a deaf person who roasts, I’m know they can by smell and sight. Finally, if you’ve sadly lost both hearing and sight, I’m sure your sense of smell could steer you right.
I was just going to say the same – we home roast and pay about $6-7 per pound and love it! Sweet Maria’s is the best source and what you will find is that it’s a very zen (and mustachian) way to enjoy coffee. It slows down the process and gives you time to appreciate it much more. Plus, it tastes fantastic!