Why Saving for Our Kids' Education Is Not Our Top Priority

Four college students studying on the lawn in the campus, Studying, Education
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When it comes to providing, a parent's job is never done. Food, shelter and clothing barely scratch the surface. What about college, weddings and help as children start their first careers? Balancing those latter costs with the priority of saving for your own future costs, like retirement, is tricky at best.

I spoke with investors who proudly admitted they had saved up a significant amount of money for their children's college education at the expense of their own retirement savings. While I applaud the desire to help your child pay for college, I believe it shows a misaligned priority and one that my wife and I hope to avoid. I'm not saying that we're aiming to be part of the 50 percent of parents who aren't saving for college, but simply that, as a priority, college savings must come after saving for retirement.

Retirement Planning Should Be Job No. 1

I know this isn't a popular statement, but it's my opinion that retirement planning should be the primary concern of most parents, with saving for college being a distant second. The average millennial will need at least $1.6 million if they retire at 65, so it's safe to say that regardless of your age, you're going to need a sizable chunk of money to enjoy a relatively secure retirement.

What tugs on parents' heartstrings is the nagging feeling that prioritizing retirement saving ahead of saving for a child's college education equates to loving your children less than yourself. I understand that feeling, on one level, but it shows a misplaced priority, in my opinion. There are loans and scholarships for college. Nobody is going to give you a scholarship for retirement.

We Don't Want to Be a Burden to Our Children

The main reason my wife and I aren't prioritizing saving for college is because we don't want to be a burden on our children as they get older. Whether or not we like it, putting their college accounts ahead of our retirement accounts will only hinder our efforts build up the nest egg we'll need to. That might not seem like as big an issue now, but fast-forward 20 or 30 years, and the lost investment time will be felt.

What gets lost in the saving for retirement vs. saving for college debate is what is in the best interest of the child long-term. Putting enough away to fully fund a college education is great. However, what good are you to your children if you need to live with them as you age because you didn't prepare for yourself? That also assumes they'll be in a position to help you. If they're not, then what becomes of you? Of course, that's the extreme end of the spectrum, but it highlights the importance of finding a healthy balance.

Saving for College Doesn't Have to Be All or Nothing

Too often we view saving for our children's college education as an all-or-nothing situation. You can balance saving for retirement and college –- even if the latter isn't the priority. That is what my wife and I do. We save each month for our children's college education, but it pales in comparison to what we put away for our retirement. There are two more reasons for our approach, other than not wanting to be a burden later in life:
  • I believe that children should be prepared for the cost of things so that they can live financially responsible lives as adults. This spans from budgeting for everyday expenses to larger-ticket items like college.
  • We want our children to view the college question through the paradigm of whether or not it's best for them. We want them to consider deeply what's going to make them happy and what's going to allow them to earn a decent living. We want them to see there are ways to fund or lower the cost of college that don't solely come down to student loans. All of those things go back to financial literacy.
I don't believe that means we love our children any less, but it means we love them enough to not be a burden on them while also helping prepare them for college (and their lives as adults thereafter) as opposed to just fully funding their college experience.

While we don't make saving for college a priority, that doesn't mean we don't view it as important. We view it in light of other factors that are going to both meet our retirement needs as well as help prepare our children for a life of sound financial discipline.

John Schmoll is the founder of Frugal Rules, a finance blog that regularly discusses investing, budgeting, and frugal living. He is a father, husband and veteran of the financial services industry who's passionate about helping people find freedom through frugality. He also writes about wise ways to manage your money at WiseDollar.org.

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Don Schnickelfelter

Excellent article. Too many people think they have to provide everything for their children and then wonder why they don't turn out to be resposible adults. When you buy them a car, a college education, a house, and a wedding, are you going to pay for their funeral also? From teenage years they should begin to learn to take care of themselves, which is both a responsibility and a pleasure. Wise, independent parents raise wise independent children. Parents who are always worrying about doing stuff for they children often have children who never grow up. Learning how to be responsible and take care of yourself is one of the great lessons in life and the sooner we learn it the better.

October 15 2014 at 9:03 PM Report abuse rate up rate down Reply

The schools loading are the up the students with debt that will seldom result in anything near the careers they hoped for. While the kids are in school vainly piling up debt the imported workforce on H1b and other visas are entering the US for their jobs at an alarming rate!

It's no wonder the participation rate is so low the students are graduating college and getting in back of the long line for crap jobs while they wait their turn in replacing older workers who are forced out of the workforce with any excuse the desperate managers can dream up.

August 20 2014 at 10:45 AM Report abuse rate up rate down Reply

There are two issues here missing from the article and this discussion. The first is the excessive cost increases for college, way out of line with inflation or normal economic growth. Part of the skyrocking costs of higher education were fueled by the availability of cheap student loans. Colleges and universities have no incentive to reduce operating costs. I agree with the posts that a 4-yr college degree is not appropriate for everyone, so school counselors should offer vocational career alternatives.

The second factor to consider in the retirement vs. education debate is the actual investment mechanism. Most states have 529 college savings plans with well-managed portfolios that yield decent returns. If started at birth, regular, contributions grow tax-free. You can sock away $250,000 or more this way. Then, right before your son or daughter's graduation, you have to time the last withdrawal so any surplus can be taken out and transferred into your retirement account or given to your graduating child. But beware, there are tax implications for non-educational withdrawals.

August 20 2014 at 10:17 AM Report abuse rate up rate down Reply

My wife worked part time jobs in retail and restaurants while our two kids were growing up and entering college. Our kids have no student loan debt through undergraduate school.They worked and we worked and university was affordable then relative to our wage effort. . My wife went to ci ollege later in life , graduating at 52 years of age. She tested out of several courses, commuted for two years and attended a well respected college for health care administration.This college allowed mostly distance edcuation options, although some residency was reuquired. Obtaining the degree did allow her to enter the health insurance industry, and perhaps "catch up" a bit. That said most of her supervisors, right up through her retirement at 68.5 two months ago did not have colllege degrees. They were smart people, mostly women who got into the professional insurance labor force at the right tme, and they wound up managing college degree holders.Thy obtained certificates and learned through OJT.

August 20 2014 at 10:14 AM Report abuse rate up rate down Reply

College degrees does nothing for you expect for doctors and lawyers and more. But still it had been shown in the reccession, have those degrees but no jobs. It does made you to wonder if going to colleges are worth of your time and money anyway

August 19 2014 at 10:21 PM Report abuse +1 rate up rate down Reply

it is not a priority because
schools are overpriced
kids learn NOTHING new in their first 2 years
they can get drunk and party at home for free
if the DO somehow graduate they will get a job that does NOT require college.

August 19 2014 at 9:41 PM Report abuse +3 rate up rate down Reply

A: Go to a State School unless your parents are rich..........B: Work a part time job to help pay..........C: Join the National Guard..... In many states you can go to a state school free if your in the Guard..............D: See if you can qualify to go to one of the ( 5 ) USA military schools.......West Point.......Annapolis.....AF Academy....Coast Guard Academy........Kings Point Merchant Marine Academy............All ( 5 ) are free if you can qualify.....................

August 19 2014 at 8:42 PM Report abuse rate up rate down Reply

Generation Entitlement is what it comes down to for these young people.

August 19 2014 at 7:31 PM Report abuse +1 rate up rate down Reply

Tell them to join the military to get help with their education and learn a lot about the real world at the same time. There should be no free lunch, that's what's giving kids (and adults) an entitlement mentality.

August 19 2014 at 1:50 PM Report abuse rate up rate down Reply
Tim L

If you live below your means and start early enough, it's possible to do both. Some of this comes down to a personal family choice, which I respect. But I personally don't want to see my children saddled with college debt. I understand the argument of teaching them financial responsibility, but there are other ways to do that than making them deal with a large college bill at age 21.

I'd rather pay for most or all of their college so they get off on the right foot financially. I know too many friends who exited school with college loans and it impacted everything from what jobs they could take, to how much credit card debt they had to take on, to their ability to save for a down payment on a home.

The best lesson to teach young people is that debt is bad. There's no such thing as good debt.

August 19 2014 at 1:38 PM Report abuse rate up rate down Reply
1 reply to Tim L's comment

I agree with u. It is possible to plan for both and at the same time teach the kid to respect the sacrifices u made for them to get them off on the right foot upon graduation. But I also taught our kids there is good debt, as it can make you money if used and structured correctly. The kids are now 29 and 31, and neither one has borrowed for a car, bever a CC balance, etc. But they have borrowed for rental properties, business adventures, and one for a medical degree. All were good debt

August 19 2014 at 10:14 PM Report abuse rate up rate down Reply