Becoming a parent comes with plenty of additional expenses – many of which, you have to prioritize. Like myself, many parents may experience feeling torn between saving for retirement and saving for their child’s college education.
We all know that investing in retirement and getting started early is important if you ever want to be able to stop working for good when you get older. But the cost of college is already ridiculously high now and is expected to steadily increase each year.
For the 2016-2017 school year, the College Board reported that a moderate college budget for an in-state public college averaged $24,610 per year while moderate budget at a private college averaged $49,320 per year.
In other words, most college graduates will have a six-figure education.
Given the rising costs of college and the fact that I want my son to pursue higher education after high school, I am still choosing to let college savings sit on the back burner while I prioritize investing in my retirement. Here’s why.
Currently, It’s Hard To Do Both
For many people, it’s difficult (but not impossible) to afford to save for your child’s college and start investing in your retirement.
A while ago, I heard some great advice that you should start saving for retirement as soon as you get your first job and start saving for college as soon as your first child was born. In a perfect world, that would work for most people but American families are saddled with debt and other living expenses that need to be taken care of now.
I became a parent younger than most people which is why my timeline for saving for college has seemed to be moving rather quickly. Given the fact that I also have to spend money to raise my child now and currently have debt to pay off myself, it’s difficult to squeeze college savings into my budget.
Paying off my student loan debt by the end of this year is a major focus before I can even think about contributing to my son’s college fund. By seeing the projected costs of college by the year 2028, it seems as if I would already be off to a super late start and not be able to fund his entire education.
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I Want to Retire Earlier Than the Traditional Age
Another reason why I’m prioritizing investing in retirement over college savings is because I don’t want to work forever. I don’t even want to work until I’m 65. I’m planning on retiring in my mid to late 40s actually which is why investing is such a huge priority for me right now.
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My Son Can Work During College
Most students work during college. I worked and so did everyone I knew and I still got good grades and graduated in 4 years. Even if just for the first 2 years, I’m certain my son can get a part-time job and earn some money during college to help supplement the costs of his education and/or living expenses.
College students don’t tend to earn a ton of money, but working during college can teach students a lot about money management and responsibility.
I don’t have any cold hard facts to support this, but from my experience, the students who worked during college and paid for some of their expenses were more likely to take their education more seriously and show up to class. I used to cringe when I’d see other students drop college classes after the refund date had passed which meant they wasted a ton of money on credits they would not earn.
We Can Discuss Options Ahead of Time
I plan to openly discuss our situation and my son’s options for funding college with him way before he graduates high school. This will allow us to come up with a game plan and explore solutions like applying for scholarships, grants, and other funding.
Kristina Ellis, a college finance author and speaker, realized that her family wouldn’t be able to afford her college education when her mom sat her down and revealed the news to her during her first year of high school.
Kristina then devised a plan to find college and scholarship success despite average grades and limited athletic ability. Her hard work and efforts allowed her to earn $500,000 in scholarships for college allowing her to attend her dream school, Vanderbilt University, for free.
Her story is really inspiring and has let me know that there are other options to consider if parents can’t afford college for their child.
It’s important to sit down ahead of time and discuss those options along with a strategy to implement moving forward.
I Will Try to Provide Some Financial Support During College Years
If my son chooses to go to a pricier college, I know my husband and I will try to provide some financial support if it helps with his living expenses or even just letting him stay home for free if he chooses to stay local.
I’ll introduce the option of starting with community college and living at home which is what I did for the first two years to save thousands of dollars.
We Hope to Invest in Real Estate Within 5 Years
Investing in real estate has always been a part of my financial plan. My husband and I have been planning to buy our first rental property within the next 5 years and our hope is that it will become an extra stream of income for us.
By the time our son goes to college, the extra income could help fund some of his education.
There’s No Promise He Will Attend College
While many parents want their kids to attend college, I have to face the fact that I don’t know what my son will want in the future.
Setting money aside in a 529 account sounds like a great idea for parents to prepare for their child’s college costs, but what do they do with that money if their child decides not to go to college?
My son might want to take a gap year or continue his education outside of a university for all I know. I will definitely encourage college if he knows what he wants to study, but I can’t say I’m 100% sure that he will choose to go.
On the other hand, I’m 100% sure that my husband and I want to retire by a certain age and I don’t want to depend on my son to support us when he gets older.
Final Word
Prioritizing retirement over saving for college does not mean that I love my son any less. It also doesn’t mean that I’m not going to set anything aside for him even if it’s just a small amount. To come to my conclusion, I carefully looked at my situation and weighed out all my options.
When it comes to paying for college, there are so many options to consider aside from going the traditional route and saving up money in a 529 account for 18 years.
In terms of investing in retirement, there is only one solution – start saving money now and let interest compound over time. No one is going to fund my retirement account for me and there are no cheaper alternatives to saving for retirement either.
If and when my son decides to attend college, my hope is that by not handing him a ton of money, he will learn to be resourceful, hardworking, and focused on success despite the odds.
Have you ever found it troublesome to balance college savings and retirement savings? If you don’t have kids yet but plan to some time in the future, have you thought about whether you’d like to save for their college expenses or not?
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I treat college savings as no different from anything else. Essentially money is fungible and only need to be assigned to something when your ready to use it. I did write a post this week on why I shun 529 accounts to keep that flexibility, but beyond that ramification there is no impact. I’m still saving the same amounts in tax advantages and taxable accounts regardless.
I’d love to read that post!
I’m agree with this post I am focused on savings for retirement and refill emergency fund…sometimes I see some interesting course, but I can say tha tis important to start to think about retirements ASAP, I’ve started at 28, is never too late but is better to do it soon…
Yes, the sooner you start saving for retirement, the better.
You are definitely making the right decision. I would not even consider saving for college until I was out of debt and making a big contribution to my retirement account every month.
Besides, all kids should pay for some of their education even if the parents are mega wealthy. It just helps them to appreciate the gift and take it more seriously.
Glad to hear I’m not the only one who thinks of that. I know people can be very grateful for something, but I feel like it’s only natural that they appreciate things more when they put in the hard work and effort to pay for them.
One of the things that I tell people when I facilitate the Financial Peace University class taught by Dave Ramsey is that your children can take out student loans for college. You can not take out loans for retirement. Usually that is a wake up call for folks and they quickly figure out how to prioritize things from there.
Very true. I don’t necessarily want my son to have to take out student loans but it’s not the end of the world. Taking out student loans also changed my life for the better and led to a whole new career.
This is definitely a tough line to walk. In my opinion, saving for retirement is a necessity. You can’t expect to work will you’re 80, nor would you want to. Saving for college is a bonus. We really want to offer our kids some help since college is so expensive and it’s not really feasible to work enough to pay for it yourself as you go.
One thing to think about is, if your retirement isn’t funded, some of the financial burden could fall to your children if they need to take care of you. So putting college before retirement wouldn’t necessarily be better for your kids.
We’re balancing the two by seeding college funds for our babies, and then making a small monthly contribution for each. Plus any money gifts they receive from family for birthdays goes toward those funds. Way more is going toward retirement, though.
Those are some pretty solid points. I definitely don’t want to be working when I’m 80 and don’t want my son to have to deal with the burden of providing for me. I like the idea of a seeding college fund.
Retiring in your mid-40s *and* saving for your kid’s college has to be tough. That’s commendable, though. At least you have goals and clear figures that will allow you to track them.
Do you think that college prices can seriously keep up over time? I know a lot of people — who are REALLY smart with money — who don’t save because they think college won’t exists “as we know it” when their kids are college-aged. I think that’s a little silly, but I’m not living their lives.
exist*