It’s no secret that college is expensive as hell and many parents are wondering how to balance saving for retirement and paying for their kid’s college education. I mean how couldn't you given the average student loan debt graduates are facing nowadays.
I’m one of those parents.
My daughter is six-years-old and my son is one-years-old. I’ll be the first one to tell you that time flies and before you know it, your kid will let you know that she wants to go to college.
In the case of my daughter, with her desires known, we have about 12 years to prepare as best as we can before she’ll be graduating. Once she’s decided where she wants to attend college, she’ll be dipping her toes into the same murky financial waters that I’m still trying to keep my head above.
Mind you, I’ve been out of college for 10 years and I’m still $80,000 in the hole for both of my degrees. Trying to balance that student loan payment, retirement, and 529 accounts for two children is an amazing amount of stress for anyone to bear.
Regardless of the headache though, I refuse to leave my kids hanging to handle those high ass tuition fees by themselves. I can’t contribute much and I won’t sacrifice retirement for them, but I’ll do my best to put aside something and pass along some of the wisdom I’ve acquired over the years.
So, what’s my plan you might ask? Well, my husband and I’ve decided that we’re cool with our five-year delay plan. Allow me to explain.
My husband and I agreed to start contributing to 529 accounts for both kids when they turn five. Don’t ask for my reasoning. It’s a simple matter of managing the budget and doing what works for us to alleviate the strain of balancing too many financial obligations at once.
I’m making my expectations known up front and both of my children will know they are responsible for a significant portion of their education.
Parents shouldn’t feel obligated to foot the bill for their kid’s higher education. If they can, by all means do it if you want to, but no one should risk retirement because Jr and Missy wants to go to college.
You can always borrow for college (although, I would strongly advise exhausting all other avenues); however, you can’t borrow money for retirement.
I’ve seen many of my family members be forced into early retirement because of health-related issues (basically receiving SSDI benefits) and the medical costs and the increased cost of living is not something you want to deal with during your glory years or while you’re sick.
With all of that said, let me be helpful and provide you with a few pointers on balancing saving for college and retirement without losing your damn mind.
1) If your employer offers 401k match, don’t be crazy — take that money!
Contribute enough to your 401k to receive your company match. Not doing so is basically leaving a portion of your salary on the table. We’ve already established that you should be saving for you first and if someone’s going to give you money for putting yourself first, you’re winning!
2) Jordans or 529 Contribution?
Look, I know kids want to look cool and have the latest gadgets their friends have. I was the same way, but let me tell you something — if I could do it again, I would take college savings over all of those things that I’ve long since forgotten about.
Your child can’t have everything and it’s not your responsibility to give them everything. They need to be taken care of, not spoiled. Prioritize their needs and contribute to their college savings and they’ll thank you later.
3) Tell them early and often what they will be responsible for when they go to college.
We will probably have enough to cover a portion of tuition and books for our children. Knowing this, we are prepared to extend to them the courtesy of living with us rent free until they graduate college. We’ll even pay for food, insurance, and cell phones. However, they’ll be responsible for the portion of tuition we can’t cover and their transportation.
If they choose to live off campus, they will be responsible for their living expenses, food, clothes — everything! If they want to be grown, let them be grown! Give them the option, but don’t make them feel obligated if they are willing to bust their butts for what they want.
4) Last, encourage them to excel outside of the classroom so they qualify for merit scholarships.
I’ve discussed before how parents and students are leaving a lot of money on the table. There are plenty of opportunities to receive extra funds for college, but many folks don’t know about them.
I encourage you to start at an early age (and yes, I mean six-years old early like me) and begin figuring out what your child likes. This way you can build their resume and help them be prepared for scholarship opportunities.
Parents should do whatever they feel is best for them and their child. There are many critics arguing for or against parent’s paying for their kid’s education. I’m not one who really gives a crap about what other parents do so I don’t fall on either side of the fence. All I can do is tell you is how I plan to help my kids graduate with the least amount of debt. If you want to do the same, follow the few pieces advice discussed and don’t be ashamed for making your kids work for that expensive education they want.