In regards to answering this question, financial advisers suggest you be selfish. President of the Charles Schwab Foundation suggests you choose retirement as a top priority. When making the decision to save for kids’ college fund or retirement, many parents would fund the college bucket first, and then think about their retirement. However, financial planners say something different and express such decision as shortsighted. Schwab further states that you never get the second chance to save for retirement so when you’re thinking whether to save for kids’ college fund or retirement, you should choose retirement. He also talks about how a loan or scholarship can be used to pay for college, but not for retirement.
The Early Bird
When it comes to choosing what to save for kids’ college fund or retirement and you choose retirement, the key here is that you begin to save early with your first job. You can set up a retirement account and if your employer funds, you can save enough. Such retirement plans give another advantage as they decrease your current tax bill and increase with delayed taxes until you begin to withdraw money, when you do retire.
Couples saving 10-15 percent of their income during their early 20s or a middle-income worker will be secure in assuring a comfortable income for retirement. Schwab says if you wait until the age of 30 to save for retirement, you must put away 20 percent of paychecks and if you wait until the age of 40 years, then this would rise to 30 percent.
When parents are thinking to save for kids’ college fund or retirement, many would argue that they do not wish for their kids to face a mountain of debt problems relating to college and its funds. There are many horror stories that go with this, which will make parents choose college funds when it comes to what to save for kids’ college fund or retirement. For parents, this could be a tough decision, as they need to think long-term. If they are poor during the moment it’s time to retire, this may be worse on the kids, especially if they are the ones who have to support their parents for the rest of their lives.
However, when it comes to what to save for kids’ college fund or retirement, you can choose both if you start saving soon. A study conducted by NerdWallet found if you wish to pay the full cost for a university that is public, you will need to save over $3,900 per annum, if you start when your child is aged one. If you leave this late and wait until your child turns ten, then this will rise to $11, 147 a year.
Paying for Kids’ College
When deciding whether to save for kids’ college fund or retirement, you may choose college even though this is a huge expense. However, for parents who have a middle-income, this could make them feel open-minded with such knowledge that there are many ways to how they can afford this. According to NerdWallet’s personal finance communicator, you have some squirm room as a sponsor and if you plan to fund fifty percent of the cost, your goal may be more manageable. When it comes to the other half, then this can come from:
• The student
• Financial aid
Farnoosh Torabi (personal finance communicator) also says the majority of parents want their kids to have a share in this by working part time jobs, whilst they are in:
• High school
Not only will this help their children financially, but will also help them to begin a higher sense of value, gain the dollar value behind it, and study about the real world. Many specialists suggest parents should have free and honest conversations with their children regarding:
• What is affordable
• What is realistic
The topic regarding money may be offensive in many households, but this needs to be discussed even if it means changing the culture in the household.
Saving For Kids’ College
When it comes to saving for college, the best way to do this is through a college savings plan – 529. This is similar to a 401 (k) and allows money to be taken directly out of your salary on a pre-tax base. You can easily set this up even before your child is born and change the named heir afterwards. Unlike the 401(k), this account can be funded using outside help. During events like holidays and birthdays, you can get family members and grandparents to contribute to this.
When it comes to the scholarship money that is available to help you pay for college, this also seems to be increasing. It was announced earlier this month by Stanford that parents of accepted students who make fewer than $125,000 per annum and have possessions of $300,000 or less will not have to be paying any tuition. Elite colleges and various Ivy League Schools also seem to be waving tuition for the majority of students from low and middle-income families.
In conclusion, when you are deciding to save for kids’ college fund or retirement, you must think long-term, which may mean going against your sensitivity and thinking of yourself initially in regard to what you should save for.