More than 70% of parents worry about paying for their children's college education, according to Gallup research. But almost as many (69%) 30- to 49-year-olds worry about having enough money for retirement. For many parents, both of these concerns are enough to keep them up at night. But with careful planning, it can be possible for many families to help their children pay for college and still retire comfortably. Here are six ways to help you prepare for both of these goals.
1. Start early — If you start saving for your child's college education when he or she is very young, your savings will have more time to compound and you may be able to achieve much greater savings without as much drag on your income. Growth of your investment can be aided by dividend reinvestment and/or compound interest. These payments along with consistent contributions can create opportunities for significant growth.
2. Take advantage of free and tax-advantaged savings — If your employer offers a 401k matching contribution, consider contributing enough to trigger the match. In addition, consider tax-advantaged college savings accounts such as 529 plans, which allow you to contribute and pay no taxes on the growth of your investments upon qualified withdrawal.
3. Set goals — It's difficult to reach your goals if you never take time to establish what they are. Take time to decide when you want to retire and college education how much you want to save for your children's. Once you've established expectations, you know what you're aiming for. Then you just need to develop a plan to get there, determining how much you need to put away each month to reach your goals.
4. Set a limit — Many parents want to help their children with college tuition, but most aren't able to give them a blank check. Think about setting a limit to the amount you're willing or able to contribute to their education and allow them to choose a college within that price range or opt for student loans to cover the difference. If your student will be applying for financial aid, keep in mind that their eligibility for that aid can be affected by your Expected Family Contribution, or the amount that a college or university determines your family can afford to pay.
By setting a limit to the amount you're willing to pay toward college tuition, you can set the stage for some important discussions with your child about the value of his or her college education. For instance, if he or she plans to major in a field that usually nets an annual salary of $50,000, it may not be worth going into debt for an out-of-state dream school if a local university offers the same degree for a price within your budget.
5. Seek scholarships — If your child is especially talented in academics, athletics, leadership or a number of other areas, he or she may be able to earn that could help pay for college. Your child's high school guidance counselor and online scholarship search services can help you locate offers that may be a good match.
6. Don't sacrifice retirement for college tuition — Remember, there are no student loans or scholarships for retirement. That means sacrificing your own future security to pay for your child's college dreams may not really benefit your child, as he or she may need to support you down the road. Consider the importance of your retirement goals -ensuring that you will be able to take care of yourself as you age.