Yes, it sounds harsh. But this is an important financial reality to understand: you should prioritize your retirement savings over saving for your kids’ college expenses.
This isn’t about loving your kids less. It’s about knowing how to prioritize your financial goals in the best possible way for both your sake and theirs.
And remember, putting your retirement needs ahead of saving for college doesn’t mean indefinitely choosing one over the other. You can balance both these competing goals and fund each at the same time.
Here’s why your retirement savings is that important — and how you can balance your desire to help your kids by saving for college while also making sure you take care of yourself.
There’s Only One Way to Fund Retirement
Our kids have countless options when it comes to higher education and paying for it. We give them whatever help we can. They can contribute themselves by earning scholarships or working part-time as they go through school.
There are plenty of ways to reduce the cost to make college more affordable, too. They can choose a lower-cost, in-state university. You can help educate kids on how to live frugally and limit their expenses while still in school.
And while it might not be ideal, students can take out some student loans to help fill the financial gaps. This is not the same thing as taking out far more than they can reasonably expect to repay once gainfully employed after graduation, or taking out more loans than they need to pay for tuition.
The point is, our children have several ways they can fund higher education or reduce the expense of college.
But when it comes to retirement? We’re mostly on our own.
We need to take responsibility for funding our lives after work. Social Security and other benefits can help, but these aren’t guaranteed (or likely to completely fund what you need for the rest of your life).
There’s not much flexibility on where to get this money — or how long we have to fund our retirement goals. If we don’t save and invest now during our working years, we may need to keep working or dramatically change our lifestyles.
Saving for Retirement Helps You and Your Kids
Still, many parents feel averse to the idea of saving for their own needs ahead of helping their children. But it’s just like the idea of the oxygen mask on an airplane: you need to address your own needs before you can realistically help anyone else.
You do no one any favors — least of all your children — if you fail to plan for your retirement and end up needing someone to help you. That burden will likely fall on the very children you wanted to help in the first place!
By prioritizing your retirement ahead of financial goals like saving for college, you ensure that you take care of yourself after you stop earning an income. Your adult children won’t need to use their own income to financially support you.
How to Save for College Without Neglecting Your Retirement
None of this is to say you shouldn’t save for college to help your children. You should allocate money to fund your own retirement goals first. But you can contribute what you can from your cash flow to college savings after that.
Make sure you take advantage of employer benefits and packages that are available to you. Contribute at least enough into your 401(k) to get the match, and fund tax-advantaged accounts that can lower your year to year tax burden.
By doing what you can to save on taxes, you might have more money left over throughout the year to use for college savings.
You can also make the most of college savings dollars by investing them into an appropriate vehicle for long-term growth. If your kids are younger than 10, they have nearly a decade to go before starting their freshman year at a university.
Take advantage of that timeline by investing into a 529 plan or another brokerage account. As they get closer to attending college, you’ll want to adjust the plan to keep that money as safe as possible.
Don’t put pressure on yourself to fund 100% of your child’s higher education, either. As your kids get older and can better understand financial realities, make them part of the conversation. Giving them the knowledge that you agree to fund up to 50% or 75% of their university expenses can help them make informed decisions about which schools to apply to or what programs to consider.
And don’t forget to encourage your kids to participate and make their own contributions. That doesn’t need to be financial. They can do their part by achieving academic success that secures scholarships and grants. Or they can commit to certain sports or programs that provide a path to a subsidized university education.
Every parent wants to help their children succeed and have a better life than they enjoyed. While saving for college is one of the primary ways you can do this, remember that your children can appreciate your help after graduation, too.
The best way to make sure they can live out adult lives in which they get to prioritize their own financial goals over your financial needs is to fund your retirement first. Once you’re on track there, then you can turn to saving for college and other goals.