Prioritize Wisely: College vs. Retirement

Should you invest in your child's education or save up for retirement? Odds are if you're asking this question, you already know that there is no clear-cut answer. In fact, for many parents, deciding whether to fund their retirement savings or their child's college tuition can be one of the most difficult finance-related questions they face during their lives. But the answer doesn't necessarily have to be an "either/or" scenario.

As parents and legal guardians who have been given the awesome responsibility of educating your children until they're ready for college, it's understandable that you might feel compelled to invest in their future by funding their higher education. However, the general rule is that it's never a good idea to save for your child's tuition at the expense of your retirement. Think about this analogy; When you fly, the airline safety video always stresses the importance of you securing your own oxygen mask before helping those around you. After all, you're much more likely to be helpful to others when you yourself and able to think clearly and breathe deeply. Caring for yourself first is not selfish, it's necessary. That said, as soon as you secure your oxygen mask, you can absolutely assist those near you. The same goes for the college vs. retirement dilemma. As long as you have a solid plan in place for your own retirement, there's no reason that you shouldn't be able to focus on additional financial goals like saving for college simultaneously.

As you envision your future and consider your financial goals, here are some actionable steps you can take to prepare to fund your own retirement and your child's education.

First, it's important to understand how you (and your partner if you have one) will afford retirement. Keep in mind that the average retirement lasts about 20 years, which is a pretty long time to rely on savings and Social Security. Furthermore, the cost of higher education continues to rise, making it increasingly likely that parents may need to dip into savings or other assets in order to afford the expensive price tag that comes with it. When you're making these kinds of decisions and tradeoffs, it's paramount to consider exactly how your retirement may be affected if you shift some of your savings around.

If you've taken the time to think through your situation and decided that you do indeed want to help your kids pay for college, take the time to explore your options. From savings plans (ESAs, 529 plans, and others) to loans from government or private lenders, there are multiple routes you can take. Additionally, keep things like scholarships, grants, and work-study programs in mind. One aspect of planning that we find especially important is including your children in the discussion as much as possible. Keeping them in the loop is a great life lesson in personal finance.

At the end of the day, money is not an endless resource for most of us, and no matter how well you plan, you may find yourself having to make sacrifices at some point along your financial journey. As your trusted financial advisor, I've been by your side from the very start, and I'll remain by your side as you navigate the difficult decisions. You can rest easy knowing that I will take the time to understand your long-term goals and how they align with your current financial picture. I am committed to helping you reach those goals, whether they include planning for retirement, funding your kids' college, or both. If you're facing a tough financial decision or if you'd simply like to discuss your current financial snapshot, please don't hesitate to reach out.