When it Comes to Your Retirement or Your Kid's College Fund, There Really is No Debate!
I have had a rash of parents walk into my office lately talking about setting up their kids college funds. While this is an important part of financial planning, it should by no means be your top priority.
Your own retirement is absolutely the most important part of your personal savings plan. Think about it. You will spend almost 1/3 of your natural life in your retirement, assuming you have the means to quit at age 65. How will you support the lifestyle you worked so hard to achieve?
Well if you carry forward inflation projections, you wont do it unless you start investing right now. There are so many reasons to save for retirement first, college second.
The first and most obvious one is that your child can actually work for it themselves. An education earned from a child paying his or her own way probably rewards the student far more than a big hand out from you. It prevents the sense of entitlement that some kids tend to have about the subject.
The second reason is that there are a myriad of ways to actually accomplish raising the funds necessary to go to school. Scholarships, grants, and loans are all pretty effective ways to do it.
The third and perhaps most important, is that subtle financial planning techniques favor retirement savings vehicles over college savings vehicles, despite what you have heard about 529 plans, Coverdell ESA's, UGMA accounts, etc.
There are big restrictions on college savings vehicles and should your child decide not to go (unfortunately the stats show that MANY do not), you are in for a rude awakening.
I know that as a parent your love your kids and you want to do whats right by them, but you will do a lot more for them by taking care of your business first. They will learn to adapt to their situation and they will grow stronger as a result of having earned their own accolades.
After all, life is about making your own way and putting yourself first. When you do that, giving back to those you love is a cinch.