Saving for retirement and kids’ college fund at the same time gets difficult when income is limited. According to the financial advisers, you need to be selfish, when deciding how to prioritize your income between saving for your retirement and kids’ college fund.
“According to a recent survey by Sallie Mae, people are funding the golden years before saving for college. The survey found that 55 percent of parents with kids under the age of 18 are saving for retirement, compared with 51 percent who are saving for their child’s college. Even though those numbers are pretty close, the survey shows that parents are putting significantly more money into retirement than college. For an average family, 53 percent of their savings are for retirement and just 10 percent are set aside for college.”
Kids always come first for parents. Most of the parents would put their kids’ need ahead of their own. But, as per the financial experts, saving for retirement should be your first priority, and saving for your kids’ college fund should come next.
Have you ever thought why is it so? If not, then check out the reasons behind saving for retirement before you spend for your kids’ education:
Start saving for your retirement early so that you get many options for a balanced financial life. Make sure you save enough for your retirement so that you don’t become a burden to your children later in life.
Your kids have opportunities for scholarships, grants, and loans to fund their college education. Besides, they also have many years ahead of them to pay off their debts or student loans. But remember, you don’t have that opportunity.
If you contribute to a 401(k) retirement savings plan, you’ll get more return than you invested. You can also invest in a 529 college savings plan. But, you won’t enjoy the employer matching there.
If you use your traditional or Roth IRA to fund your kids’ college costs, then you don’t have to pay the 10% penalty. You may also take out money from your 401(k) savings account for your kids’ education. But, it’ll be considered as a loan and you need to pay the money back.
When you have a tough time choosing between saving for your retirement and kids’ college fund, make sure you have a long-term plan. Short-term plans won’t satisfy your needs. Saving for your retirement first will give you a wider financial base.
So, what have you planned? Are you saving for retirement first or for your kids’ college fund? Do let us know about your decision.
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