Paying for college or saving for retirement?
You don't have to choose between the two.
From the day they were born, you’ve tried to give your kids the best life possible. Now they’re approaching college years, and you may be faced with really hard choices. How will you pay for their education and save for retirement at the same time? If the prospect of securing everyone’s future keeps you up at night, know this: It doesn’t have to be a college vs. retirement savings decision. By planning ahead and working as a family, it’s possible to do both (and sleep easier).
Understand the costs and make a budget together
From tuition to books, expenses can add up quickly. A college cost calculator can show you what you can expect to pay, which can help you save money in other areas.1 For example, it might make more sense to go with used books instead of new. When comparing expenses, be sure to get your kids’ input. By including them in the process early and often, they’ll start to develop positive saving habits.
After calculating costs, it’s natural to feel a little overwhelmed by the impact college expenses could have on retirement savings. You can relieve some of your stress by making a budget with your family that addresses both college costs and retirement savings. For example, you might consider having everyone make a list of where they spend money each month. There’s a good chance you’ll find things each of you can live without. The money your family saves on those items can be put toward college expenses. You’ll be working as a team and motivated to stay on track.
Having regular family conversations about the budget is important, too. Talk through the savings goals you're trying to achieve and how saving can get you there. Here’s an idea: Discuss finding a part-time job and opening a savings account with your high-school-aged kids. Contributing to their college education will give them ownership of the budget and drive home the importance of saving, and allow you to put a little more away for retirement.
Keep student loans under control
Many families use student loans to give their kids the education they’ve worked so hard for. Borrowing can considerably reduce how much you pay for your kids’ education, allowing you to save for retirement, but it’s important to be careful. Parents can be held responsible for their kids’ student loans, which can disrupt retirement savings later on. The alternative is that your kids pay off the debt. So it’s in everyone’s best interest to work together to control the size of student loans.
A great way to start is by looking into grants and scholarships.2 It’ll take some time, but it’s possible to secure thousands of dollars in aid based on things like grades, test scores and extracurricular activities. Check with local nonprofits, state and federal programs and the school they’ll be attending to see what’s available.
Your kids may want to consider professions that offer to repay debt after graduation. For example, there are student loan forgiveness programs for doctors, nurses and lawyers. Another avenue is volunteering. There are a number of service organizations that assist with student loan repayment that you can research together.3
Search for student-friendly jobs
In a perfect world, your kids would only have to focus on studying while in college. But them getting a part-time job may be necessary to allow you to stay on track with retirement planning. That said, balancing classes and work can offer valuable lessons in time management and responsibility. Even better, there are jobs designed specifically for students. For example, your child can get real-life work experience by enrolling in the Federal Work-Study program. In many cases, they’ll be placed in jobs that align with their studies.4
A part-time job with the college they’re attending is another option. By working in the dining hall or serving as a resident assistant in their dorm, your kids could get a discount on expenses like tuition and housing. And don’t forget about paid internships. Your kids will not only earn extra money, but they’ll develop skills and make connections that could lead to a full-time job after they graduate.
Paying for college and saving for retirement can be a bumpy road. It may mean making some compromises and having your kids take a greater responsibility for expenses. But by exploring your possibilities, learning common savings options, and working together as a family, you can help to better secure their future and yours.
This site is for educational purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.
Net Price Calculator. (n.d.). Retrieved June 29, 2017, from: https://collegecost.ed.gov/netpricecenter.aspx
Types of Aid. (n.d.). Retrieved June 26, 2017, from: https://studentaid.ed.gov/sa/types
Public Service Loan Forgiveness. (2017, June 01). Retrieved June 29, 2017, from: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service
Work-Study Jobs. (n.d.). Retrieved August 3, 2018 from: https://studentaid.ed.gov/sa/types/work-study