Without a doubt, the costs of retirement and college education for children are two of the largest financial hurdles any parent faces. Which one should receive most of your funds is a topic of hot debate, with personal circumstances further muddying the must-with-your-money water. Breaking down the arguments on both sides might help you make your saving decisions easier.
You Should Save for Education
Kids can’t pay—we can.
Any jobs your kids might have had before college probably aren’t going to cover all educational costs, even if they are masters of saving. Kids also haven’t had the time to build solid credit scores yet, so getting loans is tough. Some parents argue that, because of these facts, kids are not in a financial position to pay for their own education.
We have to pay for education or our child won’t be financially secure later on.
The debts acquired when your child has to pay for his own education can take years or even decades to pay off. This decreases the percentage of income your child has available for other expenses later on, as more funds will be tied up in debt repayment. If you pay for your child’s college, he can start his post-college life without this burden, and if desired, put more money into various investments.
We aren’t good parents if we don’t sacrifice to give our child the best.
In the United States, the American dream includes the idea of sacrifice. Under this ideology, you pay for your child’s education before you save for your own retirement because you believe that your sacrifice will make things better for the next generation. This concept isn’t just about your child being more financially secure than you. It’s also about the idea that “good” parents give up things they might want to make fulfillment of their child’s dreams possible.
You Should Save for Retirement
Education is a privilege to be earned, not a guarantee based on someone else’s work.
When you spend your money to fund your child’s education, you send a strong message about what your child deserves. The implication is that your child is entitled to learn, simply because the education might put her in a better position later on in life. By forcing your child to pay at least a portion of their own educational costs, in contrast, you tell your child that he is no more deserving of education than anyone else, including you. You tell him that, if you pay for school, he profits off your hard work, not his own. You communicate that, if he wants education, if he believes in it, he’ll have to fight for it—this goes a long way to teaching healthy competitiveness, self-determination and independence.
We are not the only source of money available.
Many parents begin saving for their children’s education under the assumption that they won’t get funding from other sources, or that the amount of funds won’t be sufficient to cover all costs. Although you should never count on money you don’t already have, the reality is that scholarships abound, many of which don’t require perfect grades. Financial aid also is a possibility for many families. Your child also can look into educational loans with low interest rates or work. Although your child might need a cosigner for loans if he doesn’t already have some credit and work history, you don’t necessarily need to be the one who cosigns.
We don’t have the time to financially recoup.
By the time your child is ready to enter college, the odds are good that you are nearing or already at middle age. If you drain your savings to cover your child’s education, you don’t have a lot of work years left to save and invest again before retirement age hits. It might take your children a long time to pay off their educational debts, but once they’ve done this, they’ll still have some time to establish their own retirement cushions without endangering yours. This is probably the biggest argument in favor of putting money into your retirement rather than your child’s education.