My College DailyFinance ArticleI wrote an article on DailyFinance which went live yesterday.  It was talking about how I plan to save for college and pull back on my retirement.  Now, this goes against all traditional advice. The main reason it does is because there are no student loans or financial aid for retirement.  You have what you have invested and earned over your lifetime.  I get that.  While I understand how retirement works completely, my job as a parent is to provide for my children.

You can go read the entire article, but the main points are simple.  I fund my 401(k) up to my employer match. I also have a Roth IRA through Betterment which I do not quite fully fund, but try every year. The reason I do this is I have certain goals for my money. Not everything I have coming in is funneled toward retirement. I also have an individual investment account through Motif Investing and Scottrade.  Either way, my money has different purposes at different stages.

My parents afforded me the luxury of going to college with no student loans, or at least not in my name. My parents held the loans in their name. The reason they did this was to give  me the best opportunity to succeed after I graduated.  I had to keep up my grades, work, and keep on the straight and narrow when I was in college.  If I got into trouble or my grades slipped, then there would be repercussions.  I understood it and did well in college.  I also graduated, got a job, and have held one ever since.  I don’t have a job in a field similar to my degree, but that is because I took it upon myself to learn a skill in a field I wanted to be in.  My degree got me in the interview and my skills got me the job.

I want to provide the same luxury to my son.  I feel my main job as a parent is to provide for him.  Not only emotionally and physically, but also teach him how to succeed in life.  I want to provide him the tools to make a difference and be a contributing member of society.  While there is a massive debate about if college is worth it, I feel it still is. Yes, there are many trades out there which don’t require a degree.  Unfortunately, if you want a white-collar job, then having a degree is almost a necessity.  I talk with recruiters all of the time who can’t get some of their clients in the door because they lack that piece of paper.  I do believe our system is broken, but I can’t change that right now. All I can do is plan for the future.  Since he won’t be going to college for another 17 years, all I can do is use the information I have now to look into the future.  Where will college educations rank in 17 years?  Who in the hell knows.

I will save for my son’s college education.  I will still invest in my 401(k), but will roll back my contributions to my Roth.  Pushing the money into college is a better investment for my son.  He will be required to hit “goals” while in college and probably even work.  The main plan is to have him save up for college and then we will contribute $2 for every $1 he saved.  Hopefully that will be incentive enough.  Since watching over, protecting, and teaching a human life is the biggest investment we will ever make, why not give them the best chance to succeed?  Isn’t that the entire point of having kids?  It certainly isn’t for the tax benefits.  This is just  my view point.  Yes, I will lose out on some compound interest, but in the grand scheme of things, I am doing what is best for my son.  That is my role as a father. I put him first ahead of myself.  If we had little food, he would eat and I would wait.  That is what a parent does.  I am investing in in him to increase human capital.

Before writing my article on DailyFinance, I spoke with some parents in regards to this question.  The funny thing was that most disagreed with me.  I expected the disagreement, but the funny part was their rationale seemed odd. I asked a few of them if they would die for their child. They answered “yes” without blinking.  So, they would be fine dying for their child, but they gave me issues with providing a college education for their child.  They didn’t want the expenses to get in the way of their retirement.  Unfortunately, those two stances go against each other.  You will do so much as die for your child, but you don’t want their education to ruin your retirement.  It makes not sense to me.  Now, this was just a small sample of parents, but it helped me form my opinion more.

Many of you may disagree with me, but remember I am not forgoing retirement entirely. I am still saving in my 401(k).  I also make a good chunk of change outside of my main job.  My drive and determination to make more money is ever growing. This extra money affords me luxuries which many do not have.  This is the reason why I choose to save for college instead of funneling everything toward retirement.  Who ever said you can’t do both?

 

OK, let the bashing begin.  I can take it, I am an adult!

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23 Comments

  1. We are saving for her post secondary but i don’t feel the need to put my pwn financial goals on hold just for her post secondary education. I fully expect her to put some skin in the game by working part time (umless studies are suffering) and do well enough academically to get spme scholarships like her dad and i did. I do will not allow her tp graduate with the debt i did but if ahe needs to take out a lite loan and pay it off in a reasonable time, so be it. What we save should be enough for most of one degree though.

  2. I completely get how you feel, but I think I disagree. It’s a matter of time horizons. Your child would love to have their education paid for, who wouldn’t! It’s an amazing and thoughtful gift.

    But, if the cost of that gift is the child needing to support you financially in old age… then they might have different feelings. Think about how it would feel to need to ask your child to give up things from their adult life in order to provide for you. Not the end of the world, for sure, but I think a lot of kids would rather their parents be independent throughout old age instead of paying for college.

    Of course, if you can do both then all the better!

    1. It is no problem that you disagree. The think is I am saving for retirement. I am not forgoing it and just dumping all of my money into college. I have the ability to run both right now. Yes, I am taking a little away from my Roth IRA, but I don’t really care so much about that one. It is also not a gift for him. He will be required to put some skin in the game. The money will come when he starts saving for college. We will match his savings and then add another dollar or two on top. This in turn shows him that if he works to save for college, then we will help him reach his goal. I will be independent when I am older, but that is because I have planned for it and I am able to do both.

  3. Paying for college is important to me too =) I want to pay for most of it, though we probably won’t be able to pay for all of it. We are maxing out our retirement accounts though- at this point we can do both. Our state offers a really good tax credit on 529 contributions so that is also a motivator.

    1. I hear you there Holly. I am not maxing out my retirement, but that is because I have things I need to do outside of retirement right now which requires my cash. Our state used to offer good tax benefits, but they just took those away. Time to move to another 529.

  4. Since you’re already saving for retirement, I think you’re in a position where you can afford to shift the numbers around for a bit. I think the big issue is that a lot of people are saving for their kids’ college INSTEAD of saving for their own retirement, and THAT is dangerous.

    1. You are correct Stefanie and one of the few people who actually caught that I am still saving for retirement. I am just not putting as much in one of my retirement accounts to switch my priorities.

  5. This is definitely a decision that should be made according to one’s own priorities and no else’s, despite that it may be contrary to the status quo. DH and I will have money set aside for our child yet we see the negative effects of not having nearly enough during retirement in our own families. You did clearly state that you are saving enough to get the employer match and are contributing to your Roth IRA. As long as you feel secure in the amount you’re contributing to your retirement and other financial goes, more power to you Grayson. My questions to you are: What if your son wants nothing to do with formal education by the time he is old enough for college/university? How would you feel about that?

    1. I have thought about the idea of him not wanting to deal with formal education in regards to college, but I don’t think higher education is going away. It will still have its place in our society and in business. How much it will cost will be different. While I will lead him to the water, I can’t make him drink. If he decides he doesn’t want to go to college, I can move the money to another child (we are planning on having another) or I will switch the beneficiary to my wife who has a desire to go back to college again for a different degree.

  6. Every parent should do what they think is best for their kids, but I have to disagree with you on this. I will probably contribute to my children’s education but only if I have extra money to do so. I’m not jeopardizing my future just so I can pay for my children’s college degree. There are many ways that they can pay for their own education – scholarships, working through college, and student loans – but there are very few ways to fund your retirement. I know you will still contribute to your 401k and that might be enough for you, but if it’s not, a little student loan is not that bad. My job will be to push my children to be more responsible in school and try to get grants or scholarships… might not happen, but either way they’ll probably be alright.

    1. I hear you there Aldo. My main goal is to push them into grants and scholarships. I know I won’t be able to fund their college entirely, that is just not feasible. I will also try to make sure they understand they can get an education at a lesser known college or community college and then transfer if they want to go to a bigger one. That seems to be the way of the future. Again, who knows where we will end up later down the road with regards to college. I haven’t decided if I want to continue down the 529 path as it has too many restrictions and my state just removed tax benefits, so I could just switch my investments into something else. Again, I have 16 years left to figure out my path, but right now, I am providing my son with some assistance. As noted in the post, we won’t be paying for his college in full, we are only matching what money he saves up.

  7. I completely agree with you on this. You are still saving for your own retirement, just less. If you can sacrifice yourself a little bit now, get your son set up on a good foundation, then you can catch yourself back up. His account will be able to grow, and you can then devote your extra money somewhere else. Why max out retirement every year and end up having excess at the end of your life instead of covering some different goals today? (or in 18 years). I think you are more than justified in your decisions.

  8. Personal finance is just that personal in the way we handle it. You are saving for retirement already, so this is no big issue to set aside some for the little people. I hope the education system gets fixed quick because tuition has increased 3 times more than inflation has in the last 30 years. EDU is broken.

  9. I’m planning on doing it another way, but I respect that you’ve gone through the thought process and the numbers to get to your conclusion. I think most people go either way on this without doing much thinking about it. So if you’ve done your due diligence and that’s what you feel is the best use of your resources, let the haters go suck an egg.

  10. How irresponsible that you save for your child and yourself (is that enough sarcastic bashing). My parents saved $25 a month from the day I was born and between that amount and what I was able to cover I graduated debt free. It was an investment in me and also to get me out of the house and make sure I don’t return to live with them again! Hey as long as you are investing, then no complaints. You can always change amounts and focus anytime but just need to be investing constantly.

  11. If I were in your position, I’d probably do something similar. I graduated college debt free and it really helped me out, I bought a house, started maxing out everything and have been doing so for close to 6 years now. As long as you’re still contributing a reasonable amount to your retirement accounts, I think paying for your kid’s college is pretty commendable. I’d save up just enough to cover tuition at a state school and let your child work to cover the rest. I had about 6 different jobs through college, majored in AE and played ICA sports so it’s definitely doable 🙂

    I will say though that who knows what college is going to be like in 17 years?! There is no way the rising cost of college can be maintained and I think you’re going to see a huge shift towards very inexpensive online colleges (that actually work) and things of that nature.

    1. You have a great point on the shift of affordability Harry. This is why I am rethinking my 529 account. Maybe I will just go with a Roth or a combination. If I save too much for college and the costs go down, then I could be hit is a nice amount of penalties. No one wants that.

  12. With college tuition and related costs one of the fastest rising expenses, it’s more important than ever to have a sound plan for your child’s college fund. Instead of a regular savings account, look something which offer higher interest rates like money market accounts and certificates of deposit.

  13. I don’t think there is a one size fits all plan for retirement and we shouldn’t treat it as if there is. It’s your job to make sure your duties as a parent, husband, wife, etc. are taken care of and it sounds like you’re doing so. In the grand scheme, it all comes down to being happy with the choices we make. If you are okay with it, I’m okay with it!

  14. My wife and I don’t have kids yet but we just had this conversation ourselves. We both had some of our college paid for by our parents and then had to take out loans for the rest. We both agreed that we will help out our kids when it comes to college but will have them take out loans. In our opinion, we feel that having loans taught us a lot about money and priorities.

    I totally get your point though and it makes sense. This is why I love personal finance so much – what works for you might not work for me and vice versa.

  15. I actually agree with your approach. Taking out college loans is a nightmare. Ultimately, you are still saving for retirement and can always add to those savings in the future. I think your priorities are in the right order.