For any parent, it is a well-known fact that having a child is a pricey proposition. Between childcare and increases in medical bills and household expenses, there are a host of financial responsibilities that come with the role of parent. Increasingly the cost of education is another expense that continues to be top-of-mind for parents of all ages. If a parent plans to send a child to private school for primary and secondary, the average cost is over $10,000 per year for tuition. Even public school, although tuition-free, still comes with additional expenses for items like school supplies and extracurricular activities.
The coup de grâce of children’s education expense is college, where the average student budget for full-time public four-year universities is over $28,000 per year and over $60,000 per year for private four-year universities based on a report from CollegeBoard, and prices are continuing to climb. For many parents, the timing of their retirement and their children’s decision on whether or not to continue their education coincide. This can create quite a financial conundrum, especially when saving for one goal may mean leaving the other underfunded.
How do parents decide whether to fund their retirement or their child’s education when funds are scarce? Hot take: prioritize retirement.
Why Should Parents Prioritize Retirement?
Assuming that families cannot put funds towards both goals, I suggest parents focus on retirement first. First and foremost, there are more ways to fund college education expenses and to lessen the costs of college than retirement. If a student does not have the funds to pay for college with help from parents, there are still opportunities for them to potentially obtain a combination of grants, scholarships, or student loans, though not ideal, to cover expenses. Even if a student does not qualify for financial aid in the form of grants or scholarships, more universities are offering payment plans where payments may be broken down into smaller monthly payments that can make it more affordable for parents or students to pay out of monthly income. If parents have already funded their retirement, they may have excess income in later years to assist their students with education expenses as they arise rather than saving far in advance for these expenses.
In comparison, there are few options to help fund retirement expenses beyond government programs like Social Security. Additionally, parents who prioritize their children’s education over retirement may not be able to fund their own living expenses when they are no longer able to work, which could put pressure on other family members, like children, to assist when they are beginning to build their own financial lives.
Although it can seem counterintuitive, prioritizing saving for retirement over a child’s education expenses can also assist a child with building their own financial well-being by ensuring that future living expenses will not become a financial liability for the next generation, setting them up for greater financial well-being and less financial stress.
