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What should be a priority - retirement or college fund?

For most consumers there has to be a decision on whether to build your retirement savings or to build a college fund for your children. This is a very tough decision and one that can be emotionally charged.  The best way to answer which should be a priority is to take the emotion out of the question and look at it as a pure financial dilemma.
Let’s start with the basic question, which should be a priority?
Your retirement savings should always be the first priority over building an education fund.  And the best way to determine when you can start building an education fund is to develop a complete financial plan.  This is your roadmap for savings for all types of financial situations.  And starting a retirement savings plan that has flexibility is important.  If something positive changes financially, you might have excess retirement funds that could be used for college education purposes.
Why is the retirement fund the priority?
For a couple of reasons, first, you will need a considerably larger retirement fund compared to an education fund.  You really need to start early.  Secondly, there is no other way to pay for your retirement however; there are other options to pay for college.  The sooner you start on your retirement savings the less you will need to save each month to reach your goals. 
What are options to pay for college for parents who can’t contribute to both?
Help your student get excellent grades in high school and high scores on the SAT or ACT.  Have your child get involved in service projects and other extra activities.  These two items can get your student on the path to getting considerable merit based scholarships.  There are several scholarships available to students who go above and beyond.  And don’t forget about needs based scholarships.
What are other methods to pay for college if you child doesn’t get merit or need based scholarship s?
There are options to borrow for college including student loans, personal loans or even home equity loans.  Students can also do work study to help pay for college.  These options are not options you can use for your retirement.  This is why retirement savings must come first, you can’t borrow for your retirement fund.
The best scenario would be…
That you can save for retirement and college education.  If your child gets a free ride then you have additional dollars to add to your retirement savings plan.

Posted: 1/21/2014 with 0 comments

Categories: College, Money Matters, Retirement, Saving

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