The list of hard choices and sacrifices parents make for their
children is endless. Send them to soccer camp or little league,
enroll them in private or public school, give them a 10 p.m. or
midnight curfew
– the list goes on and on. One thing that shouldn’t be on that
list – save for college or retirement.
By Eric Heckman
The list of hard choices and sacrifices parents make for their children is endless. Send them to soccer camp or little league, enroll them in private or public school, give them a 10 p.m. or midnight curfew – the list goes on and on. One thing that shouldn’t be on that list – save for college or retirement.
It might sound harsh, but parents shouldn’t sacrifice their own financial security for the sake of their children. What they should do is figure out how to save for their children’s college education and for their own retirement at the same time. The sooner they figure this out, the better.
Unfortunately, saving usually ranks lower on the list compared to other priorities. People in their 20s may be focused on paying off student loans and credit-card debt. People in their 30s may be focused on raising a family and juggling the costs that come along with that, such as buying a first home, paying two car payments, etc. When people reach their 40s and 50s, they are concerned with saving for their children’s college education and their own retirement. And this is where the problem lies.
Getting a late start can be a challenge, but it’s shouldn’t stop you from being able to retire at a reasonable age and send your children to school. Here are five tips you can use at any age.
1. Think realistically – Most people don’t have a concrete idea of how much money it takes to retire. Since the financial needs of each person will be different, try to imagine what you want your retirement to be like. If you want to maintain the lifestyle you have now plus travel, chances are you will need 100 percent of the salary you earn in your working years to live comfortably. If you plan to live a much simpler life in a less expensive area, it might be possible to get by on 60 percent of the salary you earn in your working years. If life expectancy is about 80 years and you retire at 65, you have 15 years to fund. Do the math.
2. Start early – And if that’s too late – start now! The sooner you start saving, the more interest your money will earn. Your bank can set up automatic allotments to your savings account. Start with $200 a month. You won’t see the money, so it’s easier not to spend. If you feel comfortable without $200 a month, increase the allotment to $300 and so on.
3. Look at all the options – There are more paths available for financing a college education than there are for retirement. For example you can’t get a retirement loan, but there are many types of student loans. Scholarships and grants are another great source. Compare the costs of community college, public and private universities. With loans, scholarships and grants, sometimes the difference between the school of choice and the school of second-choice isn’t as much as you thought.
4. Take control – Companies are starting to drop pension plans in favor of employee contribution plans, such as 401(k)s, primarily because they’re less expensive. Don’t just follow what your co-workers are doing. Start researching, find out how to monitor the performance of your investments and ask your company to bring in a consultant to give an investment seminar.
5. Pass on responsibilities – Before and after your children start college, it’s a good idea to give them certain financial responsibilities. There are many jobs that allow time for school and studying. Encourage them to seek out paid internships, part-time jobs on campus or seasonal work during winter and summer breaks.
It is possible to save money for college and retirement simultaneously. The key is to set goals and start now.
Eric Heckman is president of Heckman Financial & Ins. Services, Inc. Eric has 13 years experience in financial planning. Contact him at www.WealthCreator.com or 297-9800.
