‘Is it possible to save for college and retirement at the same time?’
That is a question that many young families find themselves asking these days. Student loan balances are skyrocketing while many 401(k) balances are suffering. Money is needed in both areas so which do you choose when you’re striving to fund both with potentially little money left over each month after paying your bills?
Take Care of Yourself First
Do you remember the last time you flew commercially? If you were paying attention to the flight attendant’s speech before takeoff, you would have heard him or her say that in the event of an emergency decrease in cabin pressure, masks would fall from the ceiling and that parents traveling with children should secure their masks first and then their children’s. When it comes to saving for retirement vs. saving for college, you need to take care of yourself first.
If that sounds cold, it is not intended to. Here’s why.
Every parent wants to provide the best for their children. We all want to give our kids a shot at a better life than we enjoyed. A college education is arguably a big part of that. No parent wants to see a child start an adult life saddled with debt. Still, if a parent sacrifices their own future financial security for their child’s college education, it could put the child in a position to have to support his or her parent later in life.
There is one truth to keep in mind when considering what’s right for you and your family: you can borrow for college. You can’t borrow for retirement.
Look for Other Ways to Help
There may be other ways you can support your child’s dream of a college education. Consider all of these efforts:
- Save small amounts now to pay for partial college education expenses later
- Help your child identify talents or skills he/she can develop and seek a scholarship for
- Actively engage guidance counselors early on to figure out exactly what is needed to put your child in the best position possible to pursue his or her higher education goals with as little cost as possible
- Apply for scholarships and grants
- Encourage your child to work a job in high school and save an agreed upon portion of their earnings to afford college
- Consider starting college at a junior or community college to bring costs down
Look at the decision you’re facing as an opportunity to help your child become financially literate. Bring him or her into your decision process and let them see you put money in your savings account, Four Points IRA or create a budget to prepare for your current and future financial needs.
What do you think is more important to save for first – college or retirement? How are you planning to help (or not help) your child pay for college? How are you saving for retirement today?