Monday, August 20, 2012

Saving for College vs. Saving for Retirement


Let’s hear from the experts:

The stress of paying for college has parents questioning which is more important: saving for retirement or paying for their child’s education. Although both are important investments for the future, ING Retirement Coach Jacob Gold suggests that dipping into retirement funds is not a financially healthy way to go in order to pay for college.

College is becoming increasingly more expensive. In fact, the average tuition at private colleges has tripled in the last 30 years. And private schools, which are generally more expensive that in-state schools, aren’t the only schools that are increasing tuition. State school prices are rising as well. With the average starting salary for college grads being $27,000, parents worry about their children’s financial future.

Gold assures parents that saving for college is important, but he tries to steer parents away from using their retirement to pay for their education. In fact, he says, for every dollar put in retirement, parents should only put 10 cents towards college. There aren’t any loans for retirement, but there are various other methods such as loans and grants that will help pay for college.

Gold offers the following tips for balancing saving money for college with saving for retirement:

  1. Parents should start investing money in a college fund when their child is young. Look into a 529 college savings plan which offers, for qualified education expenses, tax-deferred earnings and income-tax-free withdrawals.
  2. Get the extended family involved in saving. A video game or a toy will be forgotten easily but a financial gift will add up to an important financial investment when it comes time to start college.
  3. Grants, scholarships, financial aid, and loans can help make up the difference for college. Many colleges also offer room-and-board discounts for students who work on campus.

Although saving for college and retirement can be difficult to simultaneously, Gold encourages families to have “a disciplined and balanced strategy and plan for both goals.”

For more detailed information on Gold’s financial advice on saving for college and retirement, visit the original article at http://www.huffingtonpost.com/jacob-gold/college-savings_b_1738577.html.

And now from a recent college grad:

Just a few months ago, I graduated from college. Four years of late nights, exams, endless reading material and raised tuition rates had landed me a bachelor’s degree in English Education. When I got that sheet of paper in the mail in June that confirmed I had done the necessary requirements, I held in my hand what was supposed to be my passport to job opportunity. With that sheet of paper, I could go anywhere, be anything. But it isn’t that easy, and sometimes I feel like all I have to show for those four years of hard work is a sheet of paper with my name on it and $28,000 of debt.

I am someone who would take experience any day, even if it meant not having as much money, and I have found that state of mind definitely has its advantages. However, experience unfortunately has its downfalls as well. I wanted to live on campus to have the “real” college experience, and although doing so taught me a lot about myself and about life, I am paying for that now, literally and figuratively. I was so focused on being out on my own that I didn’t stop to consider other alternatives that would save me money in the future. What I didn’t realize then is that it is possible to have a great college experience without all the debt to go along with it. In three months, the grace period on my loans will be over and the monthly bill will start coming in. As I think about that and look back on my own college experience, I wonder what would happen if I would have done some things differently. This is what I’ve learned along the way:

  1. If your current living situation with family is good, consider living at home and going to a technical college for two years. Save money in getting your associate’s degree. If you do well, that degree will transfer practically anywhere. You will save money in all kinds of ways.
  2. If you don’t want to go the technical route, still consider living at home during your college experience.
  3. If you aren’t interested in living at home, consider being a Resident Advisor on campus. Many colleges offer the position as early as one semester into your freshman year. Many schools offer either free room and board or a discount on housing with this position. This is a great way to save money, have the experience of living on campus, and get a great leadership opportunity that looks great on any resume.
  4.  If you decide to commute or live on campus, get involved on campus. Take advantage of all of the resources the college or university has to offer. Getting involved as a commuter will help you feel more apart of the campus life and will help you to meet friends on campus. Getting involved as a resident on campus can help you to network which may lead to scholarship and job opportunities, making any sort of debt accumulation seem not as bad in the long run. Make it worth it.
  5. Start looking for scholarship opportunities your junior year of high school. Scholarships are out there and thousands of dollars of scholarship money goes unclaimed every year because people don’t apply.
  6. Consider programs such as the AmeriCorps or the Peace corps. These programs offer an education award upon completion of the program and can open up tons of job opportunities.
  7. Look for programs like the Education IDA. This program can help you to become financially literate as you save money for college. Upon completion of the program, they will match what you have saved. All of that money can go towards your college education!

Although it is often difficult to figure out where money is going to come from when it comes to paying for college, being ready for retirement, or any other financial issue that may come along, there are ways to find it. Don’t stress over paying for college; there are tons of ways to pay for a great education and college experience without dipping into retirement or breaking the bank.

4 comments:

  1. This fantastic post was very nicely written, and it also incorporates many good facts. I appreciated your skilled means of writing the post. You have made it simple for me to understand. Good and precise info.

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  4. I wish I had saved for retirement more when I was younger. Recently, I had to sell my annuity payment, and it has actually worked quite well for me. Thanks for sharing!

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