A divorce is one of the most difficult experiences in life. A relationship that was once the center of the couple’s life ends, and both partners must regroup and find a new path in the years that follow.
As financial advisors serving many divorcees, we see the toll that divorce can take. The experience is often very emotionally draining. So, clients are typically not in the best frame-of-mind as they emerge from divorce.
The financial resources held in marriage are divided, leaving both parties with far less than they had together. This can lead to anxiety and stress about financial security.
We would like to point out an aspect of divorce that too often does not get the attention it deserves. As a result of the lack of attention, ex-spouses often end up in conflict over it, sometimes for many years.
Couples who have children often fail to discuss thoroughly, much less formally agree upon, the manner in which they’ll pay for the education of their children. Financial planners are perplexed by this, because the cost of educating a child is significant. If we use the University of Oregon as an example, the cost for tuition, room and board in 2019 is roughly $25,000. Books, personal expenses and transportation can add another $3,000 – $5,000. Thus, the cost for a four-year education, ignoring inflation, is somewhere around $112,000 – $120,000.
Who is going to pay for college? Yes, some kids receive financial or merit-based aid, scholarships or assistance from other family members. But many do not. Yes, there are work-study programs. But given the level of wages paid to unskilled workers, how much can a high school graduate be expected to earn while going to college? Yes, there are various programs that provide loans for college. However, as the cost of higher education has risen much faster than the overall inflation rate, many young people have been burdened with massive amounts of debt that they will struggle to repay.
Our experience, as advisors, is that most parents want to help their children pay for college. They are willing to pay a portion, and sometimes all, of the costs. But they also expect the child’s other parent to share in paying them. In addition, they’re often conflicted about helping their children financially and also saving for their own retirement.
We believe the solution involves getting both spouses to agree to a plan for their children’s education funding. This agreement should be made during mediation and included in the settlement agreement. The agreement should state how much each parent will pay to educate the children. It should reference any unique circumstances, such as the prospect of an extended family member paying for some or all of a child’s education. It should also address contingencies, such as the death or disability of a parent, the loss of a job or a material change in income. In short, it should be as detailed and thoughtful as possible.
Having a well-crafted agreement about funding college education after divorce will reduce the prospect for conflict about the subject in the future. It will also spur both spouses to plan and save, which will enable them to be more financially secure.
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