How to Save for Retirement While Sending Your Kids to College

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How to Save for Retirement While Sending Your Kids to College

Raising a family has never been easy, but it’s even harder these days.  Think about it, we are marrying and having kids later, living longer lives, and costs – well, the cost of just about everything keeps going up.  

This leaves us in a bit of a pickle.  How can you make sure you have saved enough money for retirement while sending your kids to college?  Sure, one answer is to win the lottery, but that is much easier said than done.  As such, here are some simple tips that you can use to get your family’s finances on solid footing.

Where to Begin?

It might seem near to impossible to simultaneously save for retirement and pay for college and you are right – to a point – it’s not easy.  However, it can be done and it starts by figuring out where you want to begin.  

Maybe you are old enough that a reverse mortgage could help you get the extra funds you need.  In that case, you will want to reach out to a lender such as All Reverse Mortgage who specializes in these loans.  

But what if you haven’t reached the age of 62?  Then you need to take a more holistic approach to your financial planning.  This includes factoring in where the money to pay for your child’s college education will come from, your current monthly expenses, how much longer you expect to work, and finally how much money you will need for retirement.

It doesn’t matter if you take home $50,000 or $1 million per year, you need to follow this step as it is the only way that you will have an accurate understanding of your current financial situation.  

In addition, don’t assume that just because you have a business that you can sell it for 3 or 4x the revenues.  The fact is that your business is probably not valued as much as you think as expenses such as healthcare costs or other operating costs might be working against you.

Another thing to consider is what you will do if the economy takes a turn for the worse?  Let’s face it, the last recession was almost 10 years ago and many market watchers think that we might be do for an economic correction of some sort in the next year to two.

While your plan can’t cover all the uncertainties in the economy, it can give you an idea of what you know and what you don’t know and this will allow you to craft a financial strategy for you and your family.

Long-term Goals and Short-term Actions

We all know that planning for retirement and college are long-term goals – unless your child just turned 17 and you are planning to retire next month.  As such, you do have some time to get everything in order.   

Now, this can be both a blessing and curse.  On the downside, many people fail to comprehend how the financial decisions they make today can impact their ability to pay for college tomorrow.  

For example, are you planning to spend $10,000 on a family ski trip this winter?  Sure, the trip might be a chance of a lifetime but what if I told you that the money you spend on that trip could be robbing your children of their opportunity to go to college?

How can this be?  Well, it is the miracle of compounding interest and this can work for you or against you.  It works for you when you put your savings in interest-bearing accounts – this is how you can put your money to work.  

While it can work against you when you max out your credit cards and then only make the minimum payment every month.  In this case, you get stuck in a trap as the accrued interest on your credit card debt makes it almost impossible to pay off your bills.

Don’t get stuck in this trap.  Start by putting a part of what you earn every month into an interest-bearing account.  Now this might only be 1 percent or it might be 20 percent – the amount depends on how much you can afford but the key point here is to get started.  

The next step is by making sure you only charge on your credit cards what you can afford to pay off in the next month.  While the credit card companies might not love you, who cares as they aren’t the ones putting food on your family’s table.

Talk to Your Kids

College has become ridiculously expensive and while many positions require a college degree, the fact is that not all colleges are created equal.  As such, you want to talk to your kids about the realities of the working world and the realities of going $250,000 into debt just to get a job that will probably disappear in the next 10 years.

Granted, getting a teenager to understand their own frailty is not easy but what you can do is talk about their prospects best on their performance and then work with them to craft a realistic plan on where they will go to school and how they will pay for it.  

For many families, this might mean that your kids stay at home for the first two-years while they pursue an associates or technical degree at the local community college.  Or it might mean coming up with a work-study plan that helps them to get a degree they can use without a mountain of debt.

Remember money doesn’t grow on trees and paying for college and saving for retirement relies on having a plan, and then managing your short-term expenses while keeping an eye on your long-term goals.

 

About the Author

Michele is a Preschool teacher by day and blogger by night. She is passionate about saving money and sharing with others who like to save, too. Her motto is "Saving today so you can spend on what you need tomorrow."

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