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Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail. Profit and prosper with the best of expert advice - straight to your e-mail.Retirement savings vs paying for college
Now, how can this possibly be relevant to financial planning, you ask? First, I told you it is a sickness and a peril of the job that everything makes you think about financial planning. Second, the parallel I see is having to choose between saving for your kid’s college and saving for your own retirement. This, to me, is the equivalent of putting on your own face mask before helping others.
You see, most of us love our children more than anything else on this glorious planet. We would beg, borrow and steal to ensure their happiness. However, it is important to heed my advice here when I tell you that when it comes to saving for the future, it is extremely important to prioritize your financial future before addressing your children’s college.
Again, it may seem counterintuitive, but allow me to make my point. For starters, the obvious first thought that comes to mind is you can borrow money for college, but you can’t borrow for retirement. Although rather trite, the saying is quite accurate. If your child chooses to go to college, but you and they can’t quite afford it, there are options.- They can get a job.
- They can get a loan.
- You might be in a better financial situation to help them in the future.
- There are scholarships and grants they can apply for.
These are many of the options that are available when it comes to affording college. The point is that there are real options, and as we sit here today, there is about $1.74 trillion (with a t) in outstanding student debt in this country. For those who can’t imagine how much a trillion dollars is — if you lined up a trillion dollars in $1 bills end to end, they would extend 67,866 miles, or the equivalent of wrapping around Earth almost 2.75 times! This means that your child, if stuck with taking on student debt, would be in the “norm.”
Now if we turn our attention toward retirement, a few things become extremely clear. For starters, there is no borrowing for retirement. When we get to those pearly retirement gates, you are stuck with whatever you’ve accumulated over the past 40-plus years of working. There are also no loans or retirement grants that can make your lifestyle more affordable. Thus, what are your options if you get to retirement, and you don’t have enough money?- Keep on working.
- Live on less.
- Ask your kids for help.
Now, I am not suggesting that you shouldn’t help your children as much as possible. However, the key words there are as possible. By this, I mean you shouldn’t forgo your future financial health when your children, and you, have other options. I highly suggest prioritizing your future financial health and helping others with whatever you are able to after that.
Remember, it isn’t always our choice to keep on working, and living on less after 40-plus years is a tough pill to swallow. However, the toughest pill to swallow might just be knocking on your children’s door later in life and telling them Mom and Dad are moving in!Put those masks on
There are plenty of options that allow us to have our cake and eat it, too. All I’m suggesting is that you make sure your finances are in order and on the right track before you help others, even your kids. Make sure you know the consequences of your decisions and are going in with eyes wide open. Otherwise, you might be rudely awakened later in life when, sadly, the options are quite grim.Until next time, stay wealthy, healthy and happy.Diversified is a registered investment adviser, and the registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC.
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