I was with some friends the other weekend and we got on the topic of personal finance. One couple was talking about saving for their soon-to-be child’s college education. I was happy that they were thinking about this and coming up with some strategies as to how to save the money. But when they started talking about cutting back their retirement account contributions in order to fund the college savings account, I was saddened. Especially when there are affordable options such as the colleges of devry university.
I don’t know how or when it started, but somehow, the idea that you have to go to a top school in order to get a job has become the way. Regardless of what you want to do in life, you must go to a prestigious college that is going to cost you $70,000 per year. I don’t buy this. You can get a great education at a state college or even start out at a community college and then switch to a four-year school.
I think that college is important. You learn a lot, not only in what you are there to study, but also in life as well. It helped me at least become who I am today. Without learning some of the lessons I did, who knows where I would be today.
I plan to help my kids out with college tuition. But I won’t sacrifice my retirement in order to do so. If my kid runs out of money in college, there are student loans to fall back on. (And before they even get to loans, scholarships and grants should be looked into first). If I run out of money in retirement, I have nothing to fall back on. Unless you count my kids, but I would feel like a burden on them and don’t want to do that.
Even though I am comfortable with my kids taking out student loans, the loans taken out have to be reasonable. Otherwise, the opposite occurs: they cannot afford to live on their own because of so much student loan debt and become a burden to you.
So what is the solution? Ideally, you continue to save everything you can for your retirement. Anything extra, you use to fund their college education. When I was growing up, all of the money I received for Christmas and my birthday from my grandparents was invested for college. It may seem like $50 here and there isn’t much, but when you add the compound effect of time into the mix, the money grows.
As I re-read what I wrote, an interesting thought came to me: what if your child comes to you and says they want to go to Harvard and major in Communications? What do you do? (Note, I’m not picking on communication majors. I am trying to make a point that the cost of attendance at said school is much higher than the salary the person is expected to make once they graduate.) I’m not sure what I would do in that situation. I think I would have a talk with them to explain the debt versus anticipated income possibilities with their choice.
What are your thoughts? Is retirement your number one goal followed by your child(ren)s college tuition? What about if they want to go to an Ivy League school for a low salary major?