Setting up and sticking to a financial game plan is hard for most individuals. Adding a child to the mix, makes it even more challenging. Parents have tough decisions to make every single day of their lives and one of the biggest financial decisions they must make is deciding how they want (if they have the desire) to fund their children’s college education. In addition to college planning, most parents also need to make sure they are properly planning for retirement. So, which one is more important?
College is not getting any cheaper and with the continual increases in tuition and fees, parents need to seriously consider the various options they have access to for college planning. The most popular vehicle today is the 529 college savings plan. Aside from the 529 plan, parents can also utilize a Coverdell Education Savings account, UTMA/UGMA, Life Insurance, IRA’s or U.S. savings bonds. Each of these solutions has pros and cons, so be sure to consult with your financial advisor about which option makes the most sense for your situation. If none of these options has ever crossed your mind, there are other methods of funding a college education which most of you are familiar with… loans, grants, and scholarships. With grants and scholarships, the money is just given to you, but loans you must pay back. If you can outright avoid loans, please do, but they are a great source of funding and sometimes they end up being the only option.
Retirement is on the mind of every working adult and when that day comes, hopefully you are financially prepared. If you’re employer offers a retirement account (like a 401K), you should be utilizing it. If you’re employer doesn’t offer such a benefit or you are the business owner, then it’s up to you to take care of your retirement program. Depending on where you work, your company may still offer a pension plan, which means the company is putting money into an account on your behalf to be utilized during retirement. Pension plans are slowly becoming a thing of the past because they are extremely expensive to keep in force, thus companies are putting more of the responsibility on the individual to take care of their retirement needs. In addition to those retirement options, the government will provide some assistance via social security. Social security, by itself, will not be able to fully support you during your retirement years, thus you need to make sure to take full advantage of your retirement benefits through your employer if offered. If those retirement benefits are not in place, then you should pick up the phone or send an email to your financial advisor and get to work.
Have you figured out which one is more important? Your answer should have been retirement and here’s why. With retirement, if you don’t setup a plan and stick to it, there are no loans, grants or scholarships to bail you out. At that point, you only have two choices: (1) retire with less money or (2) work longer. Most people probably don’t like either one of those choices but unfortunately that is going to be a reality for many people. College planning is a huge priority for many parents, but there will always be loans, grants and scholarships available. Such options don’t exist when it comes to retirement, so if you are a parent and you are trying to figure out which one to focus on, choose retirement.