Every parent wants the best for their children. For some families, that means helping their children achieve the dream of higher education. At the same time, parents need to consider their own plans for retirement.
Like many parents, you may wonder, “How can I balance saving for retirement with saving for my child's college?"
With a thoughtful savings plan, it's possible to help your children pursue higher education without ignoring your retirement needs. Take a look at these steps to save for both retirement and college.
Save in the right order
Which should you save for first, college or retirement? Most financial experts will say the same thing: Parents need to save for retirement first!
Here are a few reasons why parents should prioritize their retirement over their kids' college education:
- Students can get scholarships, grants or borrow for school, but there are no financial aid funds or loans for retirement.
- There's no guarantee that your children will want to go to college. However, there will come a time when you stop working and want to retire.
- If you use your retirement fund to pay for college, you might be financially dependent on your kids one day.
Ultimately, it's never a good idea to sacrifice your future to put your children through college.
Put your retirement savings plan in action
The sooner you start saving for retirement, the better! One standard benchmark is to save 15% of your pre-tax monthly income for retirement, but be sure to talk to your financial advisor to set the right target for your goals. If your employer offers a 401(k) with a match program, be sure you're contributing enough to receive the full company match. If you don't have access to this type of account, talk to your financial advisor about opening an IRA.
Once you reach the 15% goal, any extra income can go toward saving for college. Encourage family members to add birthday and holiday gifts to your kids' college funds. Over time, even small amounts will add up!
Meet in the middle
You can strike a healthy balance between saving for your retirement needs and funding your kids' education. One way is to include college savings in your monthly budget while encouraging your children to contribute their share too.
In high school, your kids can apply for scholarships, grants and other sources of funding to help offset college expenses. They can get a part-time job before and during college to help cover the cost of textbooks, supplies and housing.
When you include your kids in the college payment process, they'll learn life lessons about money that will serve them well in school and beyond!
Throughout every important stage of life, Wright-Patt Credit Union is here for you!
If you have more questions about saving for retirement and paying for college, Wright-Patt Credit Union (WPCU) and the CUSO Financial Services, L.P.* representatives are here to help you and your family.
Check out our event calendar and register for one of our upcoming College Clarity Days or retirement seminars. You can also schedule an appointment with a College Access Counselor to walk through the college planning process. Visit WPCU.StudentChoice.org to learn more and get started today!