Today, I’m diving into a topic that hits close to home for many of us: balancing savings for college and retirement. When you’re deep in the childcare years, it’s hard to imagine ever having enough cash flow to fund college OR retirement! But as cash flow eases once those kids enter elementary school, knowing where to park it can be tricky.  Of course you want to give your kids every advantage possible, but let’s explore why prioritizing your golden years is the real MVP of the savings game.

College Savings

Let’s start with the fun stuff—college savings. Picture this: your kid is all grown up, donning a cap and gown, and ready to take on the world. You want to be their financial superhero, swooping in to save the day with a bulging college fund. It’s a noble aspiration, no doubt about it.

However, before you commit your entire paycheck to that college fund, let’s consider a few things:

The Rising Costs of Education: College tuition rates have been rising faster than you can say “student loans.” While saving for college is admirable, it’s not the only source of funding – scholarships, loans, and grants can help fill any gaps.

Retirement Waits for No One: Unlike college, retirement doesn’t have any grants or scholarships waiting for you. The sooner you start saving for retirement, the more time your money has to grow, thanks to the magical power of compounding interest. 

Financial Aid: Many colleges consider parents’ income and assets when awarding financial aid. Keeping your college savings in check may increase your chances of receiving financial assistance.

Retirement Savings

Now, let’s talk retirement savings. It might not be as glamorous as paying for Ivy League tuition, but it’s the unsung hero of financial planning. Here’s why:

No Loans for Retirement: You can’t take out loans to fund retirement. Your golden years will depend on the savings you’ve accumulated over time. If you neglect retirement savings to focus solely on college you’ll end up with a well educated child, and nobody to cover your own bills.

Social Security Is Limited: While Social Security is a safety net, it’s not meant to replace your entire income in retirement. Relying solely on Social Security checks could leave you struggling to make ends meet.

Less Stress, More Freedom: Adequate retirement savings offer peace of mind. You won’t have to worry about becoming a financial burden on your children or cutting back on your lifestyle during retirement.

The Winner: Retirement Savings

So, there you have it—why retirement savings should be your priority. That’s not to say college savings isn’t important; it is. But by striking a balance and emphasizing retirement, you’re setting yourself up for a more secure future.

While college may be an essential chapter in your child’s life, retirement is the grand finale of your own. By making smart choices today and balancing college and retirement savings, you can ensure you and your kids enjoy prosperous futures.

And, if this is something you’d like more clarity on – even hard savings numbers for both goals – feel free to reach out for a consult. We help people with this all the time.

Samantha Kirby, CFP® brings more than 15 years of experience in finance and accounting to Creative Money and loves combining her knowledge and experience with down-to-earth practical advice. Sam is based in Bellingham and spends her downtime as the matriarch of a family of 5 who like to tempt fate with death-defying activities like mountain biking, hiking and generally running through nature exposed to predators (husband included). Read more about Sam here…