This question haunts many Americans. The easy answer is: Loans exist for college tuition, but not for retirement. That creates a moral dilemma. Why? We often encourage our children to attend the best school they can get into.
To save for both college education and retirement takes parental sacrifice. If you pay thousands of dollars on an annual, deluxe family vacation, then you’re spending money that could go into a college savings plan or retirement fund or both. Perhaps, your friends or relatives bought the latest big screen, HDTV, and you find you can’t resist buying one, too. Family vacations and big-ticket purchases like TVs are just a few of the things that compete with long-range plans and saving.
Consider the following: One year of tuition, fees, room and board at a top-flight university now costs $55,000 or more. According to CNNMoney’s “Ultimate guide to retirement,” we should all be saving 10 to 15 percent of our income beginning in our 20s. These may be high hurdles to cross for many people. So, if you want to help your children pay for college, while saving for retirement, you have to begin saving early. Here are three steps:
First, build a budget. If you’re building a home, you need a plan. If you’re trying to lose weight, you need a diet and exercise regimen. If you’re trying to save money, you need a budget. Perhaps, as Americans, we’re not so good at saving because, according to a recent Gallup Poll, only 32 percent of us keep a family budget. Operating your family finances like a small business is the only way you’ll see where you can wring more money from your expenditures.
Second, ask yourself how you can trim back in certain areas. For example, research from SNL Kagan shows that the average monthly cable bill, including internet and television, skyrocketed from $48 in 2001 to $128 in 2011. Do you really need (or even watch) every channel you’re paying for? Will you put your child through college and build a retirement nest egg by slicing your cable bill? No, not entirely. But it’s one place to trim what you spend without radically changing your lifestyle. And what about that annual family vacation? Well, it can still be fun without being extravagant. Perhaps, you rent a vacation property closer to home, so you can eliminate airfare this year.
Third, imagine how you want to live in retirement. What will it cost? Add that goal to your budget. Ask your children what they might like to study and where they might go to college to reach their dream. Enlist their help saving for the goal. With a budget and goals in place, your family will benefit from a longer term of compounding growth for what you set aside.
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