When given the choice between saving for their kids’ college education or saving for their own retirement, 56% of Americans said they would choose to save for their kids’ college, according to a recent Thrivent survey. This is in line with what Americans value most: 76% of Americans ranked family as a top priority versus 39% who ranked financial stability as a top priority.
Note: 14 Key Signs You May Run Out of Money in Retirement
Learn: The Simple, Effective Way To Fortify Your Retirement Mix
If you find yourself at this financial crossroads, how should you choose what to prioritize?
Also see tips for saving or retirement while paying off student loans.
Saving for College vs. Saving for Retirement
Many parents will encounter this dilemma: Should you put money toward your kids’ future or your own?
“There isn’t a simple — or right — answer here,” said Loren Hansen, vice president of Thrivent Advisor Groups. “At the end of the day, our hearts are invested in these decisions because they are tied to our values. For many of us, giving to our families and helping them thrive is an important value, and we want our financial decisions to reflect that.”
A good idea is to create a plan for your money so you can figure out how to best allocate your funds.
“You can save for both priorities, but it should start with a written financial plan that outlines your specific goals and savings targets,” Hansen said. “With a plan, you’ll think through critical questions that will help you arrive at your ultimate vision.
Check Out: 4 Social Security Shakeups from Biden That Could Hit Your Wallet by 2024
“For example, when it comes to college, are you planning to send your child to a public or private school? In state or out of state? Will you pay for their other expenses, like books or housing? For retirement, what’s your timeline? Where will you retire and what is the cost of living? What personal goals do you want to achieve? All of this impacts how much you need to save — and at what rate, over time.”
Because these decisions can get complicated, Hansen recommends meeting with a professional.
“A financial advisor can help you navigate these questions, develop and execute your financial plan, and provide clarity for everyday financial decisions,” he said. “They can work with you to bring your values, goals and financial decisions all together to form a complete picture. This thoughtful approach to planning can help you achieve what matters most to you in life.”
Gen Z and Millennial Parents Are More Likely To Prioritize College Over Retirement
According to the Thrivent survey, Gen Zers and millennials with kids believe that saving for their children’s college education is vastly more important than saving for their own retirement (75% versus 25% and 61% versus 39%, respectively).
“Perhaps these parents had a challenging experience climbing out of student debt themselves and want to spare their children from having the same experience as they did,” Hansen said. “They may also be comfortable delaying their own retirement by a few years if it means lowering the amount of debt their kids graduate with.”
Another reason saving for retirement may be less of a priority for these generations is that it is decades away.
“Gen Z and millennial parents probably also realize time is on their side and retirement is a bit further off,” Hansen said, “so they may feel like saving for their kids’ college is a more immediate goal that they can make tangible progress on right away.”
Balancing Conflicting Priorities
No matter which generation you belong to, it’s important to strike a balance between any conflicting financial goals.
“Set savings targets and try to dedicate an amount to both goals, even if it’s small to start,” Hansen said. “Creating consistent and disciplined habits makes a meaningful difference over time.”
Realistically, you might not be able to save for college and retirement without making other sacrifices.
“Recognize you may have to make tradeoffs in other areas of your financial picture to accommodate saving for your most important priorities,” Hansen said. “That’s where a written financial plan can give you confidence in knowing you’re making decisions that are aligned to your goals and values.”
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Americans Are Prioritizing Saving for Kids’ College Over Their Own Retirement: Is This a Mistake?
Credit: Source link
