Should I Put Those Dollars Away for Retirement or My Child’s Education?

Maybe you still haven’t gotten used to the cost of diapers, but it’s already time to start saving for college.

Saving for your children’s college, while at the same time putting away money for your own retirement, are two huge financial responsibilities that loom over every parent. When it comes to balancing your savings for these two major life events, the key is to start sooner rather than later, according to financial planners.   

“The earlier you start to save for college and retirement, the more you can balance both goals and meet both goals,” says Karin Maloney Stifler, an Ohio-based certified financial planner with True Wealth Advisors, LLC. “If you wait, you are going to be forced to direct your savings for retirement and borrow for college.” 

Financial planners say it is also very important to remember that saving for retirement is your first priority.

“On a plane, they say to put your oxygen mask on first before helping your children,” Stifler says. “It’s the same thing with your finances─you have to take care of your own financial security first before you pay for their college.”

Andrea Spatz, a certified financial planner in Los Angeles at Lewis M. Wallenksy Associates Inc., says she always reminds her clients that saving for retirement must come first.

“There are no other ways to pay for retirement other than by yourself—there are no scholarships for retirement,” Spatz said. “But there are lots of other ways to pay for college.” 

Financial planners say too many parents procrastinate about saving for college.

“You have eighteen years to prepare for this—it’s not a surprise,” Spatz says. “If you put off saving for college even for a minute, it’s going to end up costing you more. You can be so much more aggressive when they are younger.”

Stifler advises that a 529 account is the best way to save money for college. She says to look for ones that have the best investment choices and the lowest costs.

“Even small amounts help,” she said. “Even if it’s just fifteen dollars a month, put something toward your child’s education.”