Striking a Balance Between Funding Your Retirement and Your Child’s Education
Many parents perceive a conflict between funding a child’s college education and building their own retirement nest egg. The conflict usually arises from the lack of financial resources to do both while funding daily living expenses, so parents become stuck between priorities and usually wind up doing nothing at all.
One of the things a Personal Family Lawyer® can help you do is sort out your priorities in a way that supports your family for the long-term. With that in mind, here are some guidelines on striking a balance between saving for your retirement and your child’s education:
Build an emergency fund first. This should be 3-6 months of living expenses that you have saved to fall back on in an emergency. If you don’t have it, you will likely be forced to raid your 401(k) or other retirement account, spending more for penalties and taxes to cover the cost of the emergency. A great way to start this fund is to set up an automatic transfer to a savings account not linked to the account(s) you use for daily or monthly expenses.
Save for your retirement or build a business to fund your retirement second. It is difficult for many parents to accept that they may not be able to fully fund a child’s college education, but consider the alternative. You aren’t being “selfless” if you spend what you should have saved for retirement or to create a business to fund your retirement on a child’s education, and then run out of money right when your kids are having their own families and trying to save for their own retirement. Then you will be financially dependent on them – just what you (and they) don’t want. There’s a reason there are loans for education but not for retirement.
Save for your kids’ college education last. Only after you have funded your emergency stash and your own retirement accounts (or built a business to fund your retirement) should you funnel cash to a child’s education fund.
If you would like to learn more about strategies for getting your financial future in balance, call our office today at 720-248-7621 to schedule a time for us to sit down and talk.
