Kid’s College or Retirement? What Should You Be Saving For??

  •  
  • 15
  • 1
  •  
  •  
    16
    Shares

College is expensive, and retirement seems so far away for many people. So for many families, guess what they do? Do they save for their children’s college of retirement? Often times…they choose to save for college. But is that the wisest choice? Should you save for college or retirement?

The Kid’s College or Retirement? What Should You Save For?

This post has been written by our talented staff writer, Kimberly Studdard.

First things first, when trying to decide on if you should save for college or retirement, you need to have the answer to two specific questions.

  1. Do you have an age in mind for when you want to retire?
  2. Do you plan on paying for your child’s entire college education?

When deciding on whether you will pay for college or retirement, your lifestyle is going to be the main factor. Everyone’s life choices are different, so deciding up front can save you a lot of

  • time,
  • money, and
  • frustration in the long run.

college or retirement

Save For College

If you choose to save for college before saving for retirement, there are a few things to keep in mind.

1) Consider the Colleges

When saving for college, first you should decide where your child will attend. It doesn’t have to be a specific college, but at least decide if you are saving for community college, a state college, or even a private college. Also, decide if you are paying for all expenses, 2 years, or 4 years of school. That will determine how much money you should be saving every single month.

Related: Free College Investment Calculator – It Costs More Than You Think

2) 529 Plans

Once you know how much you should be saving, don’t just throw that money into a savings account! Instead, consider investing into a 529 plan. Not only will this money be used directly for college expenses, but it also can be withdrawn tax-free as long as it’s used for college expenses.

3) Scholarships + Financial Aid

You shouldn’t ever have to pay for all of your child’s college expenses. With so many scholarships, grants, and work for tuition opportunities, your child can cover some expenses on their own. Thousands of dollars go unclaimed every year for scholarships, simply because people don’t know they exist or don’t apply.

4) Have Your Child Help

If you don’t plan on paying for all 4 years of college, or all expenses (including living, meals, books, etc.), talk with your child as soon as they are old enough to start thinking about college.

  • What will they pay for?
  • Can they live at home instead of living in the dorms to save on costs?
  • Will they pay for their books?

By having this conversation early, you give your child the opportunity to save for their future expenses, and also have a clear outline of what everyone is expected to pay for.

Save For Retirement

The fact of the matter is, a parent isn’t obligated to pay for their child’s college, but they should make sure they can pay for their own life. 

To be brutally honest, things often don’t work out as planned. Your health might force you into early retirement, or maybe investing later in life doesn’t yield you as much money as you thought. If it was up to your child, what situation do you think they’d rather have?

  • Financially taking care of their aging parent for years and years? OR
  • Paying $20,000 in student loans that they decided to take out.

For most, I suspect that they’d choose to be obligated to the loans – not to your poor life planning.

If you need to start on retirement, or don’t want to work until your 80 just to live, you shouldn’t feel like you have to pay for college. There are so many ways for a child to cover college costs, and many do it on their own. If you plan on saving for retirement, here’s how you can do it.

1) Invest In Your 401k

Working for an employer? Take advantage of their employer matching if they offer it! Even if they don’t,consider investing in your 401k now. The longer you have money in your investing accounts, the more time it has to grow.

2) Invest In A Roth IRA

As long as you don’t make too much money, you can contribute up to $5,500 in a Roth IRA account every single year. You can withdraw money from your Roth IRA accounts tax free, but the longer you keep it in, the better.  

3) Save All Your Extra Money

Have a side hustle or investment property? Pretend that money doesn’t exist and throw it into retirement savings. Have a bonus? That can go in too. If you plan on saving as much money for retirement as possible, every single bit counts.

College Or Retirement? Why Not Both?

In our society today, we’re often posed with a choice of just two options – and we believe we can only choose one.

  • Should we buy a reliable car, or buy a cheap one?
  • Make a bunch of money in our job, or find a flexible one so we can spend time with our kids?
  • Save for college or retirement?

Well you know what? Why not choose both??! You can buy a cheap car that’s reliable. It’s possible to make a ton of money while working only 20 hours a week. AND it IS possible to save for retirement AND save for your kid’s college!

Consider the answers to your questions early on in this article.

  1. Do you have an age in mind for when you want to retire?
  2. Do you plan on paying for your child’s entire college education?

Then, if the answers are important enough to you, change your current life so that both of those wishes can be met. If you decide that it’s simply not possible, then make some small considerations, communicate them with your kids, and work together toward both of these goals.

What about you? Are you saving for your kid’s college or retirement? Or both?

If you enjoyed this article, Get email updates (It’s Free!)


  •  
  • 15
  • 1
  •  
  •  
    16
    Shares
  •  
  • 15
  • 1
  •  

8 comments to Kid’s College or Retirement? What Should You Be Saving For??

  • Nice post, very helpful.

    Ideally, we’d want to save for both. But retirement takes priority.

    Mrs. BD and I are both 33 with no kids at the moment, but we’d press for retirement first.

  • Kathy

    In a word….both. However, retirement would/should come first. Hubby and I paid 7.5% into our pension fund plus we paid the maximum we were allowed into our Thrift Savings Fund (federal employee version o 401K). But we also paid into our son’s college fund. Sometimes we could only afford to put in $25 or so a month, but every month we put something into it. As our income increased, we increased the amount saved and we managed to have good investments that allowed us to pay for his college all the way through his masters program….which he finished one month after we retired at age 55…..with zero debt. It can be done.

    • Totally agree! You’re always on top of things, Kathy! We’re saving $150 a month for our 20 month-old daughter – have roughly $2,200 in a 529 already. And our 401k has 7% going into it…with another 50%-ish going to real estate! 😉 Lol. We’re a little heavy in real estate right now. Love it!

  • We are focused on financial independence/retirement but have a general plan for college. We have 3 children under age 7. Right now we are building up our rental property portfolio. The plan is to invest in cash flowing properties that will cover (or at least help with) college costs.

    • Yeah, we’re kind of on the same plan, BUT if those investment properties could just cash flow into more investment properties, that would be the ideal scenario. So we’re really trying to do both.

  • I think that striving for both is the proper approach. Both are very important needs for the future, and this allows you to address them both. Also, if you have a fixed amount that you divide between the two, you can make adjustments fairly easily if you’d like to focus on one more than another.

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

  

  

  

CommentLuv badge