5 Tips to Juggle Retirement and College SavingsSubmitted by Financial Asset Management Corporation on August 24th, 2015
Perhaps the two greatest financial goals of adults with families are comfortably retiring and confidently sending their children to college. Guiding your children into adulthood and relaxing after they’ve flown the coop are major life events that should be reflected upon with joy and happiness. However, allocating funds for both at the same time can easily cause financial stress and fear. The good news is there are expert tips that make fulfilling such lifetime goals far from an intimidating experience.
Your Retirement Should be the Priority
While trying to save as much money as possible for your children’s education is an honorable endeavor for any parent, your retirement shouldn’t be sacrificed in the process. Keep in mind that there are always scholarships, loans and grants available to help your children connect the financial dots.
Consider a secure financial future for yourself as one of the best gifts you can give your children. They will inevitably accrue their own debts as adults (cars, homes, college for their children, etc.), and they shouldn’t have to worry about your financial footing during retirement on top of everything else. Set aside money for your children's college education, but don't neglect to save for your future as well.
Start Saving Early For You and Your Children
Maybe it’s not necessary to rush to open an account the day your children are born, but you definitely don’t want to wait too long, either. It’s simple: you’ll be able to set aside more money the sooner you start contributing to your savings. Whether it’s your retirement or your children’s college fund, compound growth is the fuel that powers a successful savings account of any kind. In other words, save what you can starting when your children are young and that money will experience reliable growth over time. For example, a good idea is opening a 529 account when your children are young and regularly contributing to it as they age.
Look into Scholarships & Grants
Scholarships and grants are reserved endowments. In the United States, thousands of students attend college and universities each year thanks to Pell Grants, Ford Grants, and merit aids. Don’t be deceived into thinking your children have to be geniuses to qualify for such awards, either. Money is aided to students based on a number of different qualities. And, if your kids apply for admission to schools where their grades simply put them in the top quarter of the incoming class, they'll likely be eligible for merit-based aids that provide tuition assistance.
Never Cash Out a Retirement Savings Fund
One of the biggest mistakes parents can make is cashing out their retirement savings fund. As mentioned before, sacrificing your financial future to put your children through school isn’t the answer. In the long run, your fiscal health is damaged as well as that of your children if they end up having to pick up the slack by paying your bills. Not only does this deplete your retirement fund that had years of compound growth, but fees and other penalties may also accompany such action. Children will have the ability to make more money once their college education is over. Your retirement is there for you when you are unable to bring in that income that you used to relay on.
Teach Financial Responsibility
In the event your children do end up using loans to pay for some of their schooling, use it as a teaching tool. Give your children the opportunity to learn lessons about financing and debt so they develop a healthy relationship with money and a respect for credit. You can help them gain an insight into credit repayment plans and show them firsthand the dangers of debt. Implementing responsible fiscal habits early on will only pay off in the end. Teaching your children through example is the best gift you can give to them, before sending them out to world to make their own financial decisions. Teaching your children early about how much money the life you have actually costs and a budget that goes along with that life with no doubt have a lasting effect on them.
As you begin to plan for your child's future remember that your retirement is equally important. The steps to achieving each goal should be considered with the other in mind. Above all else, you want to enjoy your future with a healthy income and watch as your children flourish in their careers and their own families. Save now, and you will be able reap the benefits of your contributions as you sit back and enjoy watching everything and everyone grow.