Saving is a journey. It is not something that can be accomplished in a week, a month, or even a year. It is a practice rooted in discipline and executed with diligence and strength. There are so many milestones that people save for: a home, a college fund, retirement, etc.
But how can you do it all?
Parents often grapple between two in particular: retirement and education, these two seem to be at odds with each other. Many parents ask me: should I save for retirement or save for my children’s education?
There is no clear answer to this question, and each family has many choices in front of them. But there is one thing that I always want them to remember: it is alright if you can’t do it all.
Understand Your Priorities
Financial goals are something that need to be prioritized. With time, those priorities may shift, but it is important to understand your progress. Below are some ways to check-in on your big financial goals in order to better prioritize your financial needs.
By establishing goal milestones, you will be able to concretely see the progress you have made and what is still left to be done.
Every 6 months look at the contributions you have made to your saving goals. This can help you adjust as needed.
Priorities can shift - that is normal. By taking a look at your finances and your goals on a regular basis you will be able to determine which ones are doing well and which ones need attention.
Understanding the motivation and intention behind your savings goals will help you reach them. But what happens when you have two competing top priorities? Let’s take a look at different methods you can use to think through the retirement vs education standoff.
Both retirement and education require a regimented savings strategy. Each of these milestones are expensive, will expend a significant percentage of your resources, and are important goals to reach. How can you balance the need for retirement income with the want to put your kids through college?
There is no single, “one size fits all” answer, but I can provide some points to consider when trying to prioritize these two big goals.
Whenever you fly on an airplane, the flight attendants run through a list of safety procedures. One key element of that demonstration is that should the cabin pressure decrease, masks will be available for distributing oxygen. The instructions always say to secure your own mask before assisting others. This same principle applies to your finances. Save for yourself before you save for others. Your top priority should be yourself, because if you are financially stable, then you are able to assist others when and if they need it.
The Business of Loans
Remember that very few people can exist entirely on Social Security and retirement loans do not exist. So most the financial burden is left completely up to you. Student loans, however, do exist. So, if your child has to take out a loan to help cover the cost of their tuition, that is an option. There are also other options for paying for tuition: scholarships, grants, self-support (70 percent of students work while in college), and co-op programs. Explore all of these options with your child to help supplement the cost of their education. Remember that most employers prefer students who have experience outside the classroom when they are recruiting graduates.
The Guilt Trap
There is no group of people more familiar with guilt than parents. It is one reason for the old saying “When you have kids, you are playing for keeps.” Parents experience guilt on a regular basis when trying to strike the balance between tender love and tough love. They also know how to inflict it when necessary. It is never an easy emotion to shake for anyone who is in touch with reality.
Even though there is a strong case for prioritizing retirement savings, many parents feel guilty for not providing 100% financial support for their children. Remember, you can’t always do it all. You may feel guilty and your feelings are valid, but if you do not have enough saved for retirement, you may have to rely on your kids later in life which would have the inverse effect. Of the two mistakes that can be made in retirement - spending too little or spending too much - most people believe that spending too much (due to not saving enough) is the worse mistake.
You may not always be able to do it all, but with strong communication, vision, and planning, you can avoid nasty blunders, feel good about your financial goals, and understand each step taken to reach them.
Need help to get started with setting your long-term saving goals? Contact me today. I'd love to guide you through the process.