Perhaps your “babies” are reaching the age of earning their driver’s license, or maybe your babies are in the newborn stage. Regardless of their age, deciding whether to prioritize funding your retirement or your kids’ college fund is a common dilemma. Here are some factors to consider:
- Your Retirement Needs:
- No Loans for Retirement: Unlike college, there are no loans or financial aid for retirement. Ensuring you have enough saved for your retirement is crucial.
- Longevity and Health Costs: Consider the possibility of living a long life and the potential health care costs that may arise.
- Your Current Financial Situation:
- Debt and Emergency Fund: Make sure you are not carrying high-interest debt and have an emergency fund in place before prioritizing long-term goals.
- Employer Match: If you have a retirement plan with an employer match, contribute at least enough to get the full match as it’s essentially free money.
- College Funding Options:
- Scholarships and Grants: Explore scholarships, grants, and work-study programs that can help reduce the cost of college.
- Student Loans: While not ideal, student loans are available and can help bridge the gap if needed.
- Blended Approach:
- Balance: Consider a balanced approach where you contribute to both your retirement and your kids’ college fund. This way, you are making progress on both fronts. That said, if the choice is between your retirement and college, lean towards building your nest egg first.
- Prioritize Retirement: You can’t get back time that you didn’t invest for your retirement. It is commendable to save for your children, but don’t neglect your responsibility to not burden your kids with your financial shortfalls in the future.
- Impact on Your Children:
- Teaching Financial Responsibility: Having your children contribute to their own education can teach them financial responsibility. Look for opportunities to introduce them to the workforce to learn the value of employment and how to manage their newly received income.
- Clear Communication: One of the most important steps in ensuring everyone involved is on the same page is having open communication. If there is doubt you can offer financial assistance for college, be sure to communicate this to your children while also giving them advice on how to set them up for success.
How can you know if you’re on track for retirement? Your financial planning team at Francis can analyze your current savings and create detailed projections to help answer this question. Schedule a meeting today!
