By Paula Pant
When you hold your first child for the first time, 18 years sounds like a long time. You assume you'll be able to save for college in that length of time. After all, it's almost two decades away, right?
Not really. Life's other expenses catch up with the best of us, and before you realize it, both retirement and your kids' college expenses are coming around the corner.
If you don't have enough time and money to reach your ideal financial goals for both college and retirement, one goal will need to take priority.
And here's the hard truth: retirement should be your priority. We know it's hard to focus on yourself and not your children, but saving for retirement needs to take precedence. Here's why.
Your kids have time, you don't
Your kids have time on their side to repay debt, build savings and grow wealth. They have their entire life and careers ahead of them. You don't.
As terrible as it sounds, time is not your friend. In the next 20 or 30 years you could start to have serious medical problems or difficulty with movement. You won't have the energy, drive, or ability to work as hard as you once did. If you spend all of your retirement savings on sending your child to college, you could face serious financial struggles during retirement.
Your kids have access to student loans
Any student at any level of financial need can receive an education loan. Whether it's a fully-funded Pell grant or just an unsubsidized Stafford loan, your child will have options for financing their college tuition.
You can't take a retirement loan. You don't have access to the same buffet of financial options as your children. There's no Pell Grant that pays for retirement.
If you forgo retirement savings for the sake of their college, there's a chance you'll become financially dependent on your adult children during your golden years. There's nothing more stressful than the idea that Mom and Dad are broke, but they're too old or sick to help themselves.
If your kids can't help you, you may need to scrape together paychecks from any part-time jobs you can handle or any Social Security you may qualify for (which may not be enough.)
Don't lock yourself into high-interest debt
If you inadequately save for retirement, you may have to rely on credit cards with much higher interest rates to pay for food, gas, and clothing while you're in retirement.
Federal student loans carry reasonable interest rates that your child will be able to pay off without undue hardship. They'll be better-able to pay low-interest student loans than you would be if you were forced to rely on credit cards.
At first glance, a home equity loan may look like a decent option to pay for your child's college education, but think carefully about the financial implications. You don't want to risk losing your house if you aren't able to make payments on the loan. Student loans are a much safer financing option for your child's college education.
Stake in the game
College is filled with distractions, ranging from parties to video games. There are plenty of justifications for skipping class, not studying hard, and scraping by.
If your child knows that he or she is paying for a portion, or all, of their college education, they'll have a stronger stake in the game. This might be the impetus they need to get motivated to study. After all, why skip class when you're the person who's paying for it?
Additionally, sheltering your children from the realities of budgeting, saving and debt payoff might not be in their best interests. Your children will start their adult life balancing rent payments, car payments and grocery bills with their student loans. This balancing act may teach them the importance of avoiding debt and managing money wisely.
Provide Support, Without Putting Yourself at Risk
The best gift you can give your children is the peace-of-mind that mom and dad will be fine in retirement.
Don't put your quality of life or your home on the line to help pay for their education. You did your job by raising them into adulthood. Now it's their turn to start taking care of themselves.
Your children have the skills, talent and energy to be able to pay for their college education. They will be fine, and so will you.