Raising a child is expensive. From basic needs like food, clothing, and doctors’ visits, to extracurricular activities, experts say rearing a child from age 0 to 17 costs roughly around a quarter of a million dollars. And while you’re spending that quarter of a million to raise your mini-me, you still have to think about finding enough extra income to save. But then, the question arises: Where should you be focusing your savings? Should you be saving for retirement to live out your golden years carefree, or should you be saving for your little one’s higher education? This question that pervades the minds of parents finally has an answer: Retirement should be your main priority, and here’s why:
Scholarships, Grants, and Loans
Your soon-to-be student can receive funds from the government and private institutions in the form of scholarships, grants, and loans. Scholarships are offered for a variety of reasons - his or her chosen major, sports or hobbies that he or she is interested in, even the state in which he or she grew up could be grounds for scholarship eligibility. Grants are also available to qualifying students based on special talents, studies, sports, and even income. Scholarships and grants are considered free money, meaning they are gifts that do not have to be paid back. Encourage your student to take advantage of any free money available. Loans are another viable option for your student to pay for his or her higher education. Loans can be need-based, non-need based, state, or private. All of these loans have different parameters and rules for interest rates, distribution, and repayment. Entering retirement, on the other hand, doesn’t offer as many funding options as entering college. In fact, the main way to pay for retirement is through a retirement account such as a 401(k) or an IRA. These retirement accounts are funded almost exclusively by you, and money needs to be saved in there for an extended period of time.
Higher Education Options
With the rise in popularity of online schools, vocational schools, and associate's degrees, apprenticeships, it’s archaic to believe that an on-campus, four-year degree is necessary to thrive. If your child knows the career he or she wants to pursue, encourage them to research the type of schooling that is needed to reach their goal. Avoid pigeonholing him or her into thinking that an on-campus, four-year degree is the only way to make a decent living and live a good life. Depending on the education needed for the career, he or she could spend significantly less time and money in school, and be better equipped to enter the job force earning much more money (and owing much less) than they would after graduating with a four-year degree.
Instead of placing a burden on your sanity and your wallet to fund the entirety of your student’s higher education pursuit, consider, instead, financing part of your student’s college in the form of books, room and board, or a monthly allowance for their food and extracurricular activities. When approaching saving for your student’s higher education, an all-or-nothing mentality can be de-motivating and may cause you not to save for your child's future at all, when in fact any financing that you can provide would be extremely helpful to your soon-to-be student. Consider saving small amounts and providing financially for him or her in any way you can while still keeping your retirement goals in mind.
Avoid Becoming a Burden
If you don’t make saving for retirement a priority, you may be unable to fund your retirement lifestyle, which may leave you with one option: moving in with your children. By prioritizing your retirement now, you’ll be able to prioritize your children later by remaining independent in your golden years. But, if you do decide to focus on your child’s costly high education rather than your retirement, you’ll be able to see the expensive degree you funded every day on your way to the bathroom.
Avoid becoming a burden on your children later in life—focus on saving for retirement now. Remember all of the options your children can choose from for education and funding, and keep in mind that anything helps.
Speak with a wealth advisor today to learn how you can reach your retirement goals. Call 866-454-8582 or click here.