Parents, way too many of you are still getting it all wrong when it comes to college. A recent survey by T. Rowe Price reports that 68% of parents think saving for their kids’ college is a more important priority than saving for their own retirement.
That means that 68% of survey respondents get a failing grade from me. And to my millennial friends with young children, you are at the head of the failing class. More than 75% of millennials prioritized college saving for kids above retirement. Are you nuts? Your 20s and 30s are when saving in retirement gives you a huge advantage: decades when your money can grow. Wait until your 40s to get serious about retirement saving means losing out on so many valuable years of compound growth.
People, let’s review why retirement savings must be the priority for every family.
There are no loans for retirement!
If you don’t save for retirement today, what do you expect to live on tomorrow? Social Security will not be enough.
And don’t you dare start with the “Oh Suze, but I will do anything for my kids” pleading.
If you would do anything for your kids, the top of the list should be to make sure you will never be a financial burden for them. How can you promise that if you aren’t saving enough for retirement? Even worse is if you intend to take on lots of debt to pay for college. That just puts more strain on your household finances.
And please don’t be overly optimistic that you will be able to manage it all. Nearly three in four parents in the T. Rowe Price survey said they would be willing to delay their retirement to pay for college. I get the sentiment. But are you really sure you will be able to work longer, or work longer in a job that pays as much as you will need? The answer is: no. You might become ill, or need to take care of someone else, or be downsized, or nudged out.
You must make saving for retirement your household’s priority. That is good parenting.
Here’s how your kid will be able to get a college degree without upending the family finances: