Being a parent often means putting your children's needs before your own. And when it comes time to prepare for college, many parents feel they're doing the right thing by stashing money in a college savings plan so their child can avoid crippling student debt. This is admirable, but if doing so leaves you unable to save for retirement, it could be the wrong move.
Putting your retirement savings first might seem selfish, but it could actually spare you and your kids a ton of financial hardship down the road. Here's why.
Image source: Getty Images.
Retirement loans don't exist
Borrowing money to pay for college can make it challenging for young workers to save up for their long-term goals. But at least the option is there for those who want a higher education and don't have the savings. There's no equivalent for older workers who weren't able to save enough for retirement.
Inadequate retirement savings could put you at risk of losing your home or being unable to afford other essentials. Some people may be able to avoid this by working at least part time, but if you develop health issues or have to care for a family member, this might not be an option. Social Security and any other government benefits you qualify for may help you get by for a little while, but when that's not enough, you may need someone to take you in or cover your remaining expenses.
That burden is most likely to fall on your kids, and it could have a much bigger effect on their finances than paying off student loans. They could easily spend tens or hundreds of thousands of dollars providing you with food, housing, and healthcare, among other things. And in order to do that, they may have to put off their other long-term goals, including saving for their children's education.
By focusing on your retirement first, you can reduce the likelihood of this happening. Even if you aren't able to save enough for all your expenses, you can at least reduce how much your children need to cover for you.
Other ways to help your kids with college costs
There are several other ways you can help your child defray the costs of higher education without footing the bill yourself. If they qualify for financial aid or scholarships, you can assist them with filling out applications.
You could also help them price out student loan options to find the best possible rates. Focus not only on interest rates but also repayment terms. As a general rule, federal student loans tend to be more flexible than private student loans. But it doesn't hurt to look at both.
If you have some extra cash on hand by the time your child is attending college or beginning to pay off their student loans, you can chip in then. Give them the money for a payment or two as you're able to do so.
Feel free to explain your reasoning to your children if they don't understand why you aren't saving more for their schooling. And if you're able to save for retirement and their college at the same time, go ahead and do both. But always remember to keep your retirement savings at the top of your priority list, for your own and your children's sake.
