• Mon, Sep 15 2008

Should You Save for Retirement or College?

Many budget and financial experts note that retirement saving should always come before college saving. In fact most experts think that many things (debt pay-offs, emergency funds, etc) should come before college savings. I’m inclined to agree, but some of my pals don’t agree, so I thought I’d throw it out there, and see what Simply Thrifty readers think.

Reasoning behind saving for retirement before college: 

Kids can get college grants, scholarships, loans, and more. Good luck getting a retirement scholarship.

Your child may not want to go to college. If you learn this fact too late, it’s well, too late. Your money could have been invested in a nice 401(k) or Ross IRA, instead of sitting lamely in a college account.

Your future directly affects your child’s future. Do you really want to be asking your college-educated kid for an allowance when you’re 70? No? I thought not. Needing your kids to support you is a tough situation for both you and your kids.

What do you think?

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  • http://www.momgadget.com Gayla McCord

    I never really thought of this but it does make sense. Besides, by the time the little buggers get to college age, many parents may need to retire :)

  • http://thefabricbolt.blogspot.com Chris

    This is one of the things I find very curious these days. When I went to college in the 1980′s we pretty much paid our own way – either loans, scholarships or grants. We didn’t expect our parents to foot the bill. Now all I hear is “I can’t afford to go to college.” “I don’t have anyone to pay for my college.” Am I missing out on something here? Maybe it is the mentality of today’s younger generation – expecting something for nothing or a sense of entitlement. I don’t know. However, I do know that it bugs the heck out of me. I have no college accounts set aside for my kids. I don’t know what they’ll choose to do, or if they even will go to college. Only time will tell and they can always sign up for a loan to get through those times. Besides, I think that route will build a little bit more character than having someone just paid their way.

  • dh

    You need to save for both. They can’t get scholarships and loans that easily, especially if you are professionals with a middle class job, and not a minority. The FAFSA form will take into account all savings except retirement, which is one reason people take out their retirement money to pay for college rather than put it into a savings account. A person who owns a big mortgage and owes lots of money is more likely to get assistance over a person who saves and lives frugally in a much smaller home because homes are not counted as an asset. In order to get money for a grant you are better off divorced without a job. If I sound bitter, I’m not, I’ve just been to many of the financial aid meetings. Loans aren’t all that great either because a lot of them start accruing interest right away instead of when you finish college. Public colleges are getting very competitive because of this, and are harder to get into. Private schools give better scholarships which brings the cost down close to being comparable to the public schools although a little bit higher. In my state you can’t put money directly into a college savings account for your child until they are 18. That means the savings is counted under your name. Federally, if it’s in the child’s name it isn’t counted as an asset under either the child or the parent. Why are the rules so skewed against staying married, living frugally and trying to save instead of go into debt?