I’m Not Saving for Junior’s College Education!

You don’t hear that often.  In fact, you hear the opposite.  Most people want to save for their children’s college education.  With skyrocketing costs (average 4-year college tuition will exceed $30K/year by 2020) and your scars from paying student loans, it’s natural to want to save for your children.  But, does it make financial sense?  Should you save for college at the expense of saving for retirement?

Here are a few reasons you shouldn’t save for college (before retirement):

  • Retirement resources are dwindling:  With reduced pensions and uncertain social security, saving for retirement should be your top priority.   Paying for your kid’s college education and then moving in with them doesn’t make sense on multiple levels.  It’s the same reason airlines tell you, “in case of an emergency, put your mask on first before assisting other passengers.”
  • You can’t borrow for retirement:  Try going to a bank and asking for a retirement loan.  No collateral, no income…just need a loan to maintain your lifestyle.  It probably won’t happen.  Retirement is completely on you.  College, on the other hand, has financing options.
  • Teach financial responsibility:  When something is free, how much do you value it?  The same holds true for college.  In general, teenagers don’t value anything except themselves.  By forcing them to take a loan and reminding them of the future payments, you’ll create a sense of responsibility.   Even if you have a secure retirement nest egg, force your child to take loans (or work study) and then pay after they finish school.  They will place greater value on their education.

Still, it’s hard to look at your young child and not feel the need to save for their education.  Here’s an alternative.  Put it in your will.   It would read as follows:

I, [Your Name], bequeath my adjusted estate to pay for the following (in order of priority)

  • Outstanding student loans for my children
  • Current tuition for children’s education
  • Student loans for grandchildren
  • Current tuition for grandchildren
  • Remaining is split between children and charity (you would need to define this)

Disclaimer – this statement has not been reviewed by an attorney but you get the gist.

By paying for college education in your will, you get the satisfaction of saving for your children’s education without risking your own financial security.

What else?  What are your perspectives on saving for college?  Do you think you should save for college or retirement first?