Is it more important to save for me or my kids?
July 6, 2020

Dear Frost,

I’m torn between the need to save for my future (retirement savings) and for my children’s future (college savings). What are the things I should consider? What do you recommend taking precedence? I have a young family and would love to start saving for college and retirement in earnest, but honestly it feels impossible. We’re already stretched so thin. — Save for Me or My Kids

Dear Me or My Kids,

I’m sorry you feel like you can save for only one goal at a time—but I understand that stress! People with young families are easily overwhelmed with how to tackle financial goals and best practices.

Take Charge

If you have a budget, take a look to find places where you might be spending unnecessarily. Do you have gym or music subscriptions that you aren’t using? Does the family eat out a lot? If so, you can save those discretionary expenses! If you don’t have a budget, create a simple budget with online tools or apps and detail how much money comes in and how much money goes out. You may find extra money that you didn’t know you had or you can decide to use it differently. With a young family, you will be surprised the small amounts you can use to invest in your future will add up quickly!

Put Yourself First

Once you know how much money you have to invest, if you have to pick between you and your child, prioritize yourself. That’s right, first and foremost, save for your retirement. (When you do, you’ll indirectly be prioritizing your child.)

You won’t always be in this financial condition and as you progress, your savings can too.

If you have the opportunity to contribute to a 401(k) and your employer will match the contribution, do it! You can’t take out loans for retirement, but they can for college. If you really need money from your 401(k) for their schooling before you hit retirement age, most have loan provisions. Those provisions will allow you to take a loan against the account and pay it back at a much lower rate. If you haven’t yet started a retirement account and your employer doesn’t offer one, there are a few ways you can open your own account. Start as soon as you can and save as much as you can.

For the Kids

We always advise parents to start saving for their kids as early as possible, but rest assured it’s never too late. Plus, you can start college funds with as little as $20-$50 a month. I personally started with small amounts like that, and I still have money left in the account—and my son just finished college! One thing we did to help bolster his account was to ask for “college money” on his birthdays and during the holidays. Then, any time a friend or family member wanted to know what he needed, that was an easy answer—he certainly didn’t need more toys! Just getting an account started is a big deal and offering loved ones the opportunity to share in one of your child’s most significant life events can make a big difference.

Flexibility for Their Future

I’d like to add one little note to keep in the back of your mind when you’re starting to save for your kids’ education: You’ve got options. There are several ways to save for college, including 529 accounts, Roth IRAs, Education Savings Accounts, CDs and savings bonds, and through trusts. Each of these options comes with different benefits and will be more or less attractive depending on your financial situation and goals. Hopefully knowing your kids have lots of options when it comes to paying for their education helps you feel a little more confident about prioritizing yourself. Because after all, retirement is a sure thing, but you never know what your kids’ goals will be as they grow up.

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