In One Chart: 1 million good reasons to choose public over private schools

Sam Dogen of the Financial Samurai asked his readers Thursday if they’d take $1 million now to send their kids to public school over private school.

Understandably, about 90% said, “absolutely!”

That’s a lot of money — no doubt about it. A wad of that size would be hard to turn down. But, according to Dogen’s calculations, people are doing exactly that when they opt to take the private-school route instead of sticking with their local public school systems.

“With the internet making education free, it’s hard to justify paying record-high tuition for a private education unless you’re rich,” said Dogen, who attended both during his young life. “Yet many parents pay for religious reasons, fear of missing out, the desire for smaller class sizes and more attention for their kids, and the need for a more customized program if their child has special needs.”

Dogen took a deep dive into the numbers to put the cost into perspective. In this chart, he used the tuition at actual private schools in San Francisco:

As the chart shows, putting your kid through private school at today’s rates from kindergarten on up will eventually cost at least $683,992. In terms of opportunity cost, that number swells to $887,379, using a risk-free rate of return of 2.85%.

Further, if you just take the typical model allocation of 60% stocks and 40% bonds and get a fairly conservative 7% annual return, we’re talking $1,319,368 stashed away over the 16 years of education. By that measure, even after taking out the cost of public university tuition, there’s still more than $1 million in savings to be had.

“Instead of graduating with student debt,” Dogen wrote, “imagine if your parents said at the after party, ‘Congratulations for graduating college! You’re free to pursue your dreams, live wherever you want, buy a house, and even start a family because here’s a check for $1,000,000.’ You’d be set!”

What’s more, he pointed out that if your child were to invest that $1 million and add another $20,000 a year in savings from the age of 22 years old, he or she would have more than $3 million by 40 years old, assuming a 5.4% rate of return.

“Being financially independent by 40 with minimal effort is pretty nice,” Dogen said, reiterating he has no issue with private schooling for those who can afford it. “But what’s really wonderful is having the freedom to do whatever you want at the beginning of adulthood.”

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