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My parents weren't able to pay for my college, so it's always been important to me to do whatever I could to invest in my kids' education. But after having two sons of my own, I began to understand how tricky it must have been for my parents to manage their money while investing in my future. Things don't always go as planned, even with the best intentions.
My family's situation is a perfect example. My kids are 2 and 5 years old, and my husband and I haven't prioritized saving for college yet - but not because we don't want to. We've just chosen to prioritize other financial goals first.
Our first priority has been to pay off our credit card debt, which is a given. To us, it didn't make sense to push a bunch of money into savings while accruing 15 to 20% interest on credit card accounts (not to mention private student loans).
Once we began making a dent in our debt, my husband boosted his monthly contribution to his 401(k). For now, we've decided to focus on building our own future over investing in our kids' college accounts.
Why we're saving for retirement instead of our kids' college
It may seem selfish to prioritize retirement over a college savings account (especially if you've experienced the burden of student loans yourself). But the way we see it, we would rather have our future set financially than rely on our kids to take care of us when we're older. So we're still investing in our sons - just in a different way.
Tom Canale, certified financial planner and CEO of Canale Financial Group with Northwestern Mutual, says that while focusing on your own financial stability may seem counterintuitive as a parent, it's vital to put yourself in a solid financial position before allocating the bulk of your savings to a child's education.
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"It's so counter to becoming a parent, but you have to put yourself first if you don't want to depend on your children in your later years of life," he says.
One reason Canale recommends prioritizing retirement first: The amount of money you'll need after you retire is significantly more than your kids will need for college - and while your kids can borrow for their education, you can never borrow money to live on for retirement. Plus, student loan interest is often tax deductible; spending money to care for your aging parents is not.
Similarly, school is usually predictable in timing. You know when your kids will go to college, and the college experience is finite - an undergraduate degree can be completed in four years. Retirement, on the other hand, is more challenging to predict. Unplanned situations, like an illness or layoff, could lead to an earlier retirement and more years of being retired.
"Do you think your children would rather be paying a student loan for 10 years or paying for their parents for 30? If you can take care of yourself, think about the position you'll be in to take care of your children so they don't have to take care of you for 30 years when you're older," Canale says.
We plan to save for their education eventually
While it may make more financial sense to grow your retirement before going all-in on your children's college savings, that doesn't mean you shouldn't contribute at all - Canale says it's not necessarily an "either-or" situation.
He encourages all parents to create a plan for simultaneously contributing to retirement and college savings accounts - come up with an amount you're comfortable with for your own future, and once you reach it, you can begin allocating more to your children's accounts.
"With a financial adviser, you can put a plan in place for retirement to feel like you're on track while also making a smaller contribution for education," he says.
If you're focusing primarily on your retirement, for example, you could start out allocating 90% of your savings to your 401(k) and 10% to a 529 plan for your kids. Once your financial adviser affirms that you're on the right track for a financially stable future, you can shift to an 80/20 contribution.
Currently, our contribution is 100/0, simply because we have so much debt and our kids are still young. Once we have our debt paid off, my husband and I plan to start putting a small amount into a 529 account for our kids through his employer - probably 95/5 or 90/10.
We have a long way to go before we will start contributing more, but for us, the important thing is that we're thinking long-term about our kids' future by simultaneously stewarding our own.
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