War of Two Goals: Retirement Planning or College Funding

September 09, 2010

My wonderful daughter is about to embark on a very (hopefully) fruitful and fun part of her life, college.  As a parent, this is also a trying time as it often entails the child leaving the nest as well as the dollars leaving the wallet.  This rite of passage for both our kids and parents is a question that is asked often in our workshops about college planning.

Let’s face it, we as parents generally want to provide as much assistance for our kids as possible.  With college tuition’s constantly (or so it seems) going up, we don’t want our children saddled with a huge debt load once they graduate.  Especially if unemployment is around 10%.   So that means we pay for everything right?  Not necessarily.

The question we as parents should ask ourselves (assuming that money isn’t free flowing like a certain undersea oil well) is, “Are we on track to retire the way we want?”  Now what’s retirement got to do with college funding?  Everything!  Ask yourself this: will I be able to get a scholarship or grant or even a low interest loan for my retirement years?  NO! The painful truth is that if money is finite then you want to first take care of your retirement because you’re the only person who will. Our kids, at worst, will have some student loan debt and if we chose to we could help them out a little, but there are some camps out there that believe that a student paying for if not all, the bulk of their education has a vested interest to do well.

So how did I handle my daughter’s schooling?  I actually started when she was very young, teaching her the importance of doing homework and the importance of creating good study habits.  While I didn’t invest money, I invested time that would hopefully lead to an opportunity for scholarships and grants when she was ready for college.  She has also had a job since she was 16, so she already has a good work ethic.  Finally, in full disclosure, I also have a 529 Plan set aside for her because even though I understand and practice the fundamentals of finance, I’m also a parent and having something set aside makes me feel better.

Oh, and as far as our retirement, my wife and I are making sure we stay on track.