by Luke Kuchenberg | CFP®, CPWA® Founding Partner, Senior Wealth Advisor
When it comes to college savings and retirement planning, many parents assume they should put their children’s education first. In reality, creating a secure financial future for yourself is often the best gift you can give your family. Here’s why building your own financial foundation should come before funding a college account.
The day your child is born is one of life’s most memorable moments. Before long, many parents begin thinking about one of the biggest financial questions they’ll face: How should I save for my child’s future?
Like many questions in the world of financial planning, it depends. On this topic, however, for most of us, my answer or recommendation would be the same. Invest and build personal wealth first, then any extra to children’s college savings. Let me explain.
In a world of increasing costs for purchasing or maintaining your home, vehicles, gas and yes, even food, every dollar seems to carry increased value. It shouldn’t be different for the investments you make. To put it simply, most parents of young children aren’t on track for their own financial futures of retirement and healthcare, let alone able to direct extra dollars to children and their future education.
We all love our children and care deeply about their future. But to save for their potential college costs before your own retirement security is not a prudent plan and often can lead to regret. Children can obtain financial aid for further education. You cannot get a loan to retire.
Another wrinkle in this planning is the rate of change we’re seeing in the educational landscape. The advent and proliferation of artificial intelligence and how that’ll impact not only the job market but how young people will be educated or trained is something that seems to get an update weekly. Online university programs are making notable headway with their convenient schedule options and reduced costs. The future of college as we’ve known it is changing rapidly.
Making investments into accounts that are solely for that purpose, may not turn out as intended. If not used for educational purposes, taxes and penalties may ensue to access and repurpose those funds. At the end of the day, being mindful and wanting to set aside funds for your child is an honorable goal.
But like most goals, it’s wise to not just have a plan for them, but one for yourself as well. Perhaps the first question in starting that planning is this: Are you on track for your financial future? Or perhaps even more basically, do you have a personal savings fund set aside already, even in a bank account?
These are a couple of questions to ponder before you start to think about saving funds toward education. As always, if I, or a member of our team, can help you start or continue this conversation, please be sure to let us know.
