Should You Save For Your Kids’ College Or Your Own Retirement?
Morning Shift has been discussing personal financial issues all week and on Thursday turned to questions about saving for college.
Financial columnist Gail Marks Jarvis joined Morning Shift to answer listener questions and share saving tips that might seem counterintuitive for parents looking ahead to their children’s futures
If you have to make a choice, save for retirement over college
Marks Jarvis points to research that shows Baby Boomers failed to save enough for retirement, leaving their millennial children to take on loans to support them.
“So their millennial children are saying: ‘I’m saving for college for my kids because I don’t want my kids to have to go through the same thing’” she said. “But that’s wrong.”
According to Marks Jarvis, it’s much harder to get a loan at 75 than it is to get a low-interest loan for college, so millennials should start saving for retirement as soon as they land that first job.
That’s not to say parents shouldn’t save for college if it’s feasible to do both. One good option: A 529 Plan
529 Plans are state-sponsored savings plans where parents don’t have to pay taxes while the money is in savings and when it’s eventually taken out to pay for college.
Marks Jarvis recommended opening a 529 Plan, adding $25 to $100 to it every month and asking grandparents, aunts and uncles to add birthday gifts to the plan rather than sending cash.
And it’s not necessary to be an investment expert to make the most of this option. There are choices that optimize investments every year, based on the child’s age, without “getting too crazy,” Marks Jarvis said.
For more advice, press play above and hear answers to listener questions about the how 529 Plans transfer across state lines and advice for those who don’t have the flexibility to put away a big chunk of money every month.