A Father’s Dilemma: Saving for His Kids’ College Educations

In the Washington Post, Joe Heim, a father of a six-year-old son and a four-year-old daughter discusses a thing a lot of parents go through: Wanting to save for his kids’ college educations, but not actually saving for his kids’ college educations. When Heim talks to Mark Kantrowitz, a parent who publishes websites about planning and paying for college, and explains to Kantrowitz that he and his wife have been prioritizing saving for retirement over, say, putting money into a 529 college savings plan, Kantrowitz writes that off as an excuse and says that there are always ways to cut expenses to have money leftover to prioritize savings:

I start off by telling him that my wife and I have socked away money in our 401(k) plans on the theory that we think it will be easier to borrow for our kids’ college than to borrow for our retirement.

“That’s a typical argument, but it’s basically an appeal to selfishness,” says Kantrowitz. “Saving first for retirement is assuming that someone else is going to be paying for your college costs.”

Ouch. Easy, Kantrowitz.

Of course, the counterargument to this would be that not prioritizing saving for retirement is assuming that someone else will be paying for your golden years when you are physically or mentally unable to work anymore, and that children will figure out how to pay their own way through college if they have to. Suze Orman is one of the proponents of this argument: prioritize paying off your debt, putting together an emergency fund, and funding your retirement before saving for college, she says. “You have to ask yourself, What can I do to enhance my life and teach my children that they have what it takes to do it on their own?” she told the New York Times in 2009. If you’ve taken care of yourself, you’re in a much better position to take care of others. And I agree with her!

Also, more than socking money away for your kids, talking to your kids about the costs of college, what it means to carry student debt, the options between private and public colleges, scholarship options, the differences between federal and private loans, going through financial aid packages with them, and discussing what kind of careers they are interested in and what their earning potential might look like will help them significantly more in the long run.

Photo: Mark Hillary

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11 Comments / Post A Comment

Also, if you just cut out 1 billion lattes a week you’d be as rich as Warren Buffet in about two and a half months. There’s no excuse.

CaddyFdot (#2,686)

I would much rather save for my retirement than for my potential child’s education, and I am glad my parents put their retirement first too. There are other ways to pay for or attend college, and not as many to pay for regular life after retirement. The parents should take care of themselves because it sucks to put the burden of helping retired parents on the child who has no control over that cost. The child DOES have some measure of control over the college payment factors, so of the two, college costs seem a better choice for them to take on.

garli (#4,150)

Taking this with the essay on the hairpin last week it doesn’t follow that fully funding your kid’s education will cause them to have no debt early in life.

Winter (#4,527)

Why is it always retirement or college savings? They can co-exist. Sure, prioritize the retirement, but people can surely squeeze out a few bucks a month to put away for college. Sure the kids can work and borrow, but kids also aren’t considered independent at 18 for FAFSA so it helps to have at least a little put away to bridge the gaps. Honestly, it’s not that hard. The author just needs to set up the accounts, throw in 25 or 50 bucks a month for each kid and forget about it. It doesn’t sound like his situation is that dire. He is just procrastinating.

WayDownSouth (#3,431)

@Winter let’s work out the maths on this. For the six year old, he’ll presumably start uni at 18. So he has 12 years to go. If we take your example of $50/month, that’s 50 x 12 x 12 equals $7,200. That’s an inexpensive public school for one year (maybe).

Let’s be a bit more realistic. Let’s assume $20k/year over four years. So $80k / 12 / 12 equals $556 per month just for the first child. Perhaps you make a lot bigger salary than I do, but $556/month is a significant amount of money.

Note that I haven’t included interest. Equally, I haven’t included inflation, other uni expenses or taxes.

Winter (#4,527)

@WayDownSouth

$7200 is still better than nothing though. Why is it all or nothing? It’s always better to save than not. Unless college financing changes in the future (which I wouldn’t count on), colleges generally base the family]s expected contribution on income, where savings don’t factor in as heavily.

I don’t care if parents don’t want to pay anything for college. However, the impression that I get from the article is that the author wants to put some money away, but just hasn’t gotten around to doing it yet. If he sets up the accounts (529s are tax-free for college expenses, btw) and contributes automatically, I’d bet that he wouldn’t miss the money.

sh (#5,016)

@Winter Yes this. I know many people whose parents paid for part of college, but not all. Or parents who paid for the first two years but not the third, fourth, and beyond. Or, in the case of my parents, had restrictions about where I could go — I had to go to a public school in my home state or a state with reciprocity. (Which meant either WI or MN for me.) Having $7,200 is better than having $0 to put towards your child’s education.

WayDownSouth (#3,431)

@Winter My apologies, I misunderstood your original comment. Yes, I agree that it’s better to save part than none. I thought your original comment stated that he could save the entire fees at $50/month (which wasn’t your intention).

VelourFog (#5,077)

“Saving first for retirement is assuming that someone else is going to be paying for your college costs.”

Anyone else deeply unsettled by the idea that parents are so expected to pay their child’s college expenses that the quote above uses the phrase “your college costs”?

Parents in this scenario aren’t putting their retirement ahead of THEIR college costs. They either already went to college (or not).

mbl (#5,203)

I disagree with Kantrowitz. I’d suggest funding retirement even while servicing debt and saving/investing for college last. The power of time being lost will have greater impact on whether a family can build wealth than paying lower interest debt early.
The “college experience’ as it has been known(4 years living away and attending full time) has become a luxury item.
That is why attendance at community colleges has skyrocketed. In order for many students to be able to afford college, they’ve had to and will have to in future find an alternate way of addressing the goal of a college education.
– use the 2 + 2 programs that bridge CC with a 4 year school
– attend college part time while working(maybe even find an employer that might supplement your tuition)
– enter the military/ROTC/reserves and get educated/trained and perhaps money for school(yes, I recognize that being deployed to a war is a big factor…I get it)
– Instead of choosing a private school that can’t provide enough grants/aid/scholarships to bring tuition in line with public/state schools, choose the least expensive option. It’s becoming more and more apparent that for the most part, the education and what you do with it has more bearing on the individual than what school they attended. Paying $45k for a liberal arts education is for most people….well..foolish at best.

SterlingCooper05 (#2,529)

If indeed a parent chooses funding retirement or kid’s college, what scenario what the college educated adult child choose for themselves?

1.) Student loan debt with parents comfortably retired.
or
2.) No student loan debt with parents not able to retire, thus needing assistance. (probably from adult children)

I would choose the student loan debt. Parents need to fund their retirement first, then put whatever is left over into college savings.

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