Imagine you have a two-year old at home—as I do—and you finally get her down for a nap. You plop down on the couch, even if just for a brief moment. You pick up a magazine to relax, but quickly come across a frightening number, one that jolts you back to reality: $432,000.
That’s one estimate for the cost of a four-year degree from a private school beginning in sixteen years. To provide the whole $432,000, you’ll need to put away over $1,100 at the beginning of each month, assuming an eight percent rate of return.
But don’t forget you may have another child. Then there’s graduate school, paying off your student loans, saving for your retirement, your upcoming mid-life crisis …
Stressed? Don’t be. Although saving 100 percent of the anticipated expenses for your child’s education will likely be difficult (or impossible), there are other options. First, financial aid can provide valuable assistance and doesn’t seem to be going away. Most students get some form of financial aid these days. Plus, your kid might not go to Harvard (gasp!) or another very expensive private school. They might go to a public school or a less expensive private school.
Rule One: You Come First
I know it’s difficult to accept, but—at least financially speaking—your future is more important than your child’s college education.
I know you love your kids, but if you ultimately have insufficient funds for your retirement, you’re on your own. You can’t get a low-interest rate loan for retirement. There’s no financial aid office at the country club and no one confuses Medicaid for a work-study program.
If your circumstances dictate you must choose between saving for retirement and saving for your child’s education, most of your emphasis has to go to your future. Again, there are other ways for your child to get through school—not so for your retirement.
Rule Two: Have Your Child Be a Part of the Process
No, I’m not talking about this afternoon with your two-year old. Trust me, I get it: a financial lesson in our house is teaching our daughter to save at least one of the bananas for tomorrow. But your child—mine too—grows up quickly and is learning all the time. It’s important for her to discover the value of a dollar long before college orientation. Have her save part of her allowance, the gift from Grandma, or whatever—just teach her to save something. She’s learning from you, so set an example. Show your child that the whole family saves.
