Which should you save for first – your child’s future college tuition or your personal retirement? As a parent, this is a very emotional question – saving for your children’s continuing education to help them incur less debt and get a good education or financially preparing yourself and securing your future.
Many parents have decided that college savings should come first and are not only forgoing putting money in a retirement account, but they are dipping into their retirement savings to cover the costs of tuition. Yes, saving for college is important, but it is actually a luxury. How much you save for your child’s tuition is not a direct correlation to how likely it is that they will graduate. And don’t worry, your child can find other ways to pay for school: scholarships, grants, financial aid, part time jobs, or even finding a more affordable school.
In other words, we are on team “Save for your Retirement First”.
Over the past decade or so, student loans have become a serious burden to students and graduates – even forcing them to delay major milestones like getting their own place, getting married, or having a family. Many parents feel that pushing this cost onto their kids, who will surely need to take out student loans to manage it, is unfair. But if paying for college means you’re not saving enough for your own retirement then a line must be drawn in the sand.
For many parents, nothing is more important than their children. They feel as if they are being selfish or a bad parent if they choose to fund their own retirement first. However, the financial landscape has changed drastically – the cost of college has dramatically increased, social security funds are shrinking, pensions are practically unheard of, and many employers do not offer a 401k. If you want to fund your retirement, it is up to you to make sure that happens – and of course, your costs in retirements are likely to continue to rise.
Saving for college is important but not nearly as important as retirement. How much you save for your retirement does dictate when you can stop working, how you will be able to live, eat, and enjoy your golden years. Retirement is a necessity. If you do not have retirement money saved, then the hard truth is you may be working until you can’t. Once you reach a place where you can comfortably put enough money away for your retirement, then you can start savings for your child’s college education.
Instead of viewing your retirement savings as taking away from your children’s college funds, you can look at it, as a way to make sure you won’t be a financial burden on them if your retirement savings come up short.
The solution? Meet with your financial advisor to map out your financial future and when age appropriate, have honest conversations with your children about what you can and cannot help them with when it comes to financing their education.
Washington Branch Manager, Assistant Vice President