If you have kids, then it is important to invest in a college savings plan. Every dollar you save when they are young, will greater your chances of paying for their education. In turn, you must also save for retirement. How do you balance out these two important long-range investments?
Most financial planners will recommend you take care of your retirement first. The main reason being that at retirement you will no longer be making money and will definitely need the savings. Whereas, when your kids are in college, you will still have an income you can rely on to also pay for their education.
Typically, the best choice is to save for both… if you can. Start by maxing out your matched contributions to a 401k plan with an employer. That should always come first before any other investment, as you lose your company’s match if you don’t also put your share in.
After you have a good set up with your 401k, you should consider how much extra you have left to invest. Do you have the tax option to put more money away for retirement? How many kids do you have? What sort of school will they go to? These sorts of questions will help you determine your best route.
Most families can’t save enough ahead of time for their children’s college education, but any amount is helpful. Luckily, there are great student loan programs, grants and financial aid. In addition, you will most likely still be working and part of that income can go to help pay for the kid’s education. By saving a little, you can at least take off some of the burden.
Just don’t sacrifice your retirement to do so. At your retirement, you won’t have financial aid or student loans, you will only have your savings and social security.
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