To Save for Retirement or College? Which Is the Better Choice?

College or Retirement Savings: Which Should Be My Priority? | www.TheHeavyPurse.comThe weather is warming up, which means the school year is winding down. For us, summer vacation doesn’t begin until June, so Lauren and Taylor still have a few more weeks of school to enjoy, although most students are already daydreaming about summer. It’s also the time of year in my community where many High School Seniors start proudly wearing t-shirts and hoodies in their college colors and logos, which is a sign my phone is going to start ringing soon.

The start and the end of a school year always seems to remind parents of college and the need to save for it. I receive phone calls from anxious, new parents to stressed-out parents of incoming high school freshman who all share the same concern — paying for their children’s college education. Of course, this begs the question: Should it be a priority for you?

College or Retirement: Which Should Be My Priority?

The answer is easy—your retirement. I won’t pretend that is is an emotionally easy decision to make or follow. Most parents want to send their children to college and putting their retirement (or essentially themselves) first goes against every fiber in their being. Trust me, I understand. Of course, there is no reason why you cannot do both, but you need to make sure your retirement savings is on track first.

There Is No Retirement Loan, Grant or Scholarship Available to You

As noble and understanding as it is that you want to help alleviate the costs for your child, there are other college funding options available to them. A combination of student loans, grants and scholarships can help pay for their higher education. You may still be able to provide some assistance, and they can also get a part-time job. You, on the other hand, have far less resources to help you live comfortably in retirement.

Without proper retirement savings, you are left with Social Security and continuing to work. In most instances, Social Security does not provide the income most couples need to make their retirement dreams, such as traveling, a reality. It was never designed to do so. If you are fortunate, it may cover basic essentials.

Your To-Do: Determine when you want to retire, how you want to spend your time and how much money you need to do so. Play around with the numbers and see what happens if you decide to delay your retirement by 3, 5 and 10 years. Would doing so allow you to pay for your child’s college education? Are you willing to work those additional years in order to do so? There is no wrong or right answer.

Your Family Relies on Your Financial Well-Being

You’ve worked hard to create a strong financial foundation for your family to survive and thrive through any storm. Now you need to make sure your desire to help your child pay for college doesn’t put your family at risk by destabilizing your financial foundation. I’ve seen parents take out home equity loans or borrow from their 401ks to pay for the children’s college education. This is incredibly risky and can ultimately do more harm than good. Every member of your family depends on that strong family foundation you worked so hard to build, so don’t unnecessarily jeopardize it.

Your To-Do: Figure out how much support you can reasonably offer without endangering your financial security. The most important thing you can do for you college-bound children is prepare them to manage their money wisely in and after college.

Retire on Your Terms and Be Financially Independent

Becoming a parent opened my eyes to a whole new set of worries that I never fully understood previously. From the the countless debates on what to feed your babies to never wanting to be a burden to my kids, being a parent is a huge responsibility. It’s one of the biggest reasons why we sometimes do reckless things to pay for our child’s education. We so deeply believe that it is our responsibility to provide for our children, including their higher education, and feel as though we have failed if we cannot.

I understand the sentiment. I also know that sometimes these same parents wind-up, years later, needing their children to support them financially because they didn’t plan properly. Now should the children feel guilty? Absolutely not. No matter how good or pure our intentions were, we still have to live with the consequences, however. Be careful that the sacrifices you make now, won’t catch-up with you in the future.

College Is Not a Right, But a Privilege

I started saving for Lauren and Taylor’s college education soon after they were born. While they are still young, 10 and 8, they both seem interested in attending college, and I am happy to help offset some (or maybe even all) of their college costs. But I also know (as do they) that it is a privilege to attend college. There is a significant cost to attend, which should not be taken lightly. We complain about the rising costs, which I understand, but we must also remember that it is a privilege, not a right. We, as parents, need to help our children understand the cost and do our best to make sure they truly take advantage of this investment to fullest, whether we pay the bills or they do.

Think of it this way—if you were to hand me a check for $60,000 to invest, you would have expectations, right? The same principles apply here. Your child’s college tuition is a huge investment. Make sure you and they get the most out of it.

On Wednesday, Natalie, aka The Finance Girl, is going to share her student debt story with us and offer some different options to help you pay for that college investment.


The Heavy Purse Store is now open! My new downloadable Money Club Workbooks are now on sale. Each workbook provides five targeted lessons to help you raise Financially Confident Kids. Please check them out in The Heavy Purse Store.

May 12, 2014  •  45 Comments  •  College

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  1. Monday, May 12th, 2014
    Great post! I was especially interested to read this as my hubby and I are planning to adopt soon and that has brought up a new financial concern for us- when and how to start saving for college? In our case we already have a solid retirement next egg for our age. However, we are still paying off our own student loans and it feels a little crazy to think about saving for our child's college while we are still in student debt. I think we will definitely do it though, because our student loans are locked at super-low interest rates and we are on solid track to be rid of them within 2-3 years. That may change somewhat if we divert some money to a 529 plan, but I think in 18 years we'll be glad we did it.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Thanks, Dee! How exciting that you'll be adopting a new baby soon! It sounds like you and your husband are doing well against your retirement goals, so now it's balancing game of paying off your student loans, saving for your child's college education and other goals you may have. You can always start with a small amount while you pay off your remaining student loans, then increase the amount with the newly available money once your student debt is gone too.
  2. Monday, May 12th, 2014
    I agree 100% with you, Shannon. I first heard this question come up on Suze Orman, and she said some of the same things you said. It makes so much sense to make retirement as a priority but it also can be difficult to break it to your kids that you can't bankroll their college education. In reality, though, once your kid goes to college you likely don't have that many working years ahead of you while your kid has decades ahead of them to figure out their finances.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Thanks, DC. It's an emotionally hard decision to make and follow, which is why so many parents struggle. Parents definitely need to open with their children about the support they are able to provide for their college education. This needs to happen long before they ever start applying for schools too. Kids are highly emotional too and and costs are generally not their chief concern, so parents have to help them see the big picture and be prepared to make some tough decisions too.
  3. Monday, May 12th, 2014
    As early as now, we are slowly saving for our daughter's college tuition fees. Especially the price hike nowadays, surely it would cost too much to have a college student in the future. Our preparedness for retirement as well as our child's college plan by having a good fund would be the perfect solution.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      It is a bit scary imagining what college tuition will look like in 10+ years. It's great that you are able to set some money aside for your daughter's education. Even little bit helps! It can seem like a daunting task to have both retirement and college education goals funded but it is possible.
  4. Monday, May 12th, 2014
    SO glad you said retirement, Shannon!!! I am amazed at the number of people who think college savings are more important, and that college is a right. Putting college savings before retirement savings is a short-sighted, huge mistake. Better to have yourself in a financial secure position and then help your kids pay off their student loans later if you can afford it.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Thanks, Laurie. Logically, I think, many parents realize they should put their retirement savings ahead of college savings, but emotionally, it's another story. It's a bit like when you fly - you're told to put on your oxygen mask before helping others. There is a reason why you do that, even though your natural inclination would be to help your kids first.
  5. Kathy
    Monday, May 12th, 2014
    We did both. We always maxed out our retirement savings but also saved for son's college. We started as soon as he was conceived and consistently put something into his fund every month. Oh, sometimes it was as little as $25 but we never missed a month. Later, as our income increased, we increased the amount whenever we got a raise or felt that we had a little breathing room in the budget. We managed to finance him through grad school with no student loan debt. Of course that was ten years ago so I'm not sure that we would be able to do that again with the cost of college having gone up so much.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      You did great, Kathy! Starting as soon as possible makes a huge difference too. And you and your husband had the right attitude too. Sometimes you put less in than you'd like, but it was still something while keeping your financial foundation secure. People can have an all or nothing mentality and it doesn't need to be that way.
  6. Monday, May 12th, 2014
    Solid post Shannon! It can be so hard for parents to deal with the emotions of saving for retirement over college expenses. I've seen too many that have gone to the one extreme and put their entire retirement at risk because they chose to put all they could away for college and little for retirement. We like to try and do both, but retirement has to come first. As you say, there's no loan for it and last thing I want is to be a Wal-Mart greeter at 80 because we didn't save. :)
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Exactly, John! It is a very emotional decision and no parent wants their child to go into debt the moment they leave home. This is why in the perfect world, parents would have started saving when their child was baby, even if it was a small amount. Like you, we're saving for both too, but retirement comes first.
  7. Monday, May 12th, 2014
    How funny, my mom literally asked me this question this weekend. I said retirement, she said, "you'll feel differently when you have children."
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Too funny, Stefanie! And you're both right. It is a much harder decision after you have children from an emotional standpoint. It's still the right one though. And knowing you, you'll figure out a way to do both. :)
  8. Monday, May 12th, 2014
    What an interesting post. I had never thought about this. I wonder now about this kind of long long term financial planning. For a retirement decades away. I had a retirement plan all worked out. It was wiped out by the events of 2008. I, like many I suspect, have been scrambling ever since. I suppose that you have to plan, but I still wonder about the unavoidable pitfalls of life. I look forward to continuing to read your posts.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Thanks, Brad. Yes, life can throw curveballs at us to disrupt our good planning. You definitely still need to plan, including for those curveballs because those never go away.
  9. Monday, May 12th, 2014
    It's true, Shannon, this choice is an emotional one which is why it is always difficult to make the right choice. I think it is really important to remember that college is a privilege and not a right and the family has to work together to make the smartest choice for both the parent's finances as well as the child's. I understand the parent's focusing on their retirement, but then I hate when I see parent's encourage children to take out student loans for private schools then the kids graduate with a mountain of student loan debt and can't get ahead financially and risk ruining their own retirement plans/future. College has become a huge expense/investment that needs a lot of thought, consideration and preparation.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      It is hard when I see parents blindly agreeing to whatever school their child wants to attend, regardless of cost or whether it's truly the best choice for them based upon their degree and potential future earnings. Like you said, college is a significant expense/investment and parents and kids need to treat it as such.
  10. Monday, May 12th, 2014
    Great post Shannon. You are so right! When it comes to paying for school there is more than one option where retirement funds are just limited to what you've saved, unless you are willing to take one part-time work and not be fully retired. Social security won't be around forever and I don't want to rely on it being there (it most likely won't be there when I retire someday) so I started saving for retirement in an employer-match program when I was 19, contributing at least the minimum to get the full match, why leave money on the table right? The match essentially doubles your money right off the bat, not a bad return on investment :)
    • Shannon Ryan
      Tuesday, May 13th, 2014
      That's very impressive that you started saving in our 401k when you were 19! And enough to earn your company match too. :) As much as we may not want our kids to have to take student loans to pay for college, it is an option they have (and there are other options to help counter balance all those loans, like scholarships and working too!). Whereas when we retire, it's pretty much up to us to support ourselves.
  11. Monday, May 12th, 2014
    I completely agree that people need to save for their retirement first. As you said there are no grants or loans to get you through retirement. Students should be encouraged to start saving for their own education early on instead of it being the resp. of the parents. It helps them become more responsible for their work and when they go to school they tend to do better because they remember how long it took them to save up for their tuition. If mom and dad pay it may seem like an easy ride and they may take their education forgranted. I know many of the people I went to college with certainly took things forgranted because mom was paying for everything.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Sadly, too many kids get sent off to college without really understanding how to handle their money. They are used to Mom and Dad paying everything, which they continue to do in college. It is a rude awakening for them when they graduate and enter the "real" world. Some, of course, just expect Mom and Dad to continue footing the bill. There is definitely nothing wrong with having the kids help pay for their own college tuition.
  12. Monday, May 12th, 2014
    For us, retirement comes first. We do want to help our future children with their college education, but that would not be the priority. It is possible to go to college and not have parents help - I am proof of that!
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Yes, you are excellent proof that a child can pay for college themselves, Michelle! And it's really, really important that we, as parents, remember that too.
  13. Monday, May 12th, 2014
    Shannon, it's great to see you writing out something that is undoubtedly hard for people to follow. The answer is obvious that retirement is a priority over college savings; however, it's only after really realizing this that parents will follow it. This post will surely help parents come to terms with the reality that they must take care of themselves first.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Logically it's an easy choice, emotionally it is not. Sometimes college isn't on our radars when our kids are young, so then we also have to play catch-up. We hear others parents have been saving since their child was born and can cover all their costs. So our guilt grows. It's another reason why financial planning is so important. If helping your child pay for college is a priority than that's great. You just need to understand where it fits in with all of your other priorities.
  14. Monday, May 12th, 2014
    I am doing something a little different. While I am saving for retirement in both a 401k and a Roth IRA, I am also saving for my son's college education. The difference is we are not telling him about the savings. We want him to work hard for college. We want him to push for grants and scholarships. We want him to get an education on his own. If he has trouble making the payments, then we will step in with his college fund. We don't have to cause him to slack off and not push to get money for college. We will just be there to back him up if something doesn't go to plan.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      My husband spent hours and hours researching all the scholarships he could find (pre-internet days) and he only had to take a small loan to cover his costs. So it absolutely can be done! I see a lot of parents and kids automatically look to student loans without trying for scholarships first. We're saving for the girls' college education too but we do expect them to apply for as many scholarships as possible. Free money first! :)
  15. Monday, May 12th, 2014
    So many parents fund their kids college education and then have nothing to live on, when it is time to retire. The worst stories you hear are the ones about parents co-signing on huge student loans, and then have to sell their home in order to pay it off :( Like you said, there are no loans for retirement...
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Oh yes, Mackenzie. There are unfortunately a lot of sad stories out there. It breaks my heart. College is not cheap and it's something that parents and children need to sit down together to determine that it's a good fit and then how to pay for it.
  16. Monday, May 12th, 2014
    I had this conversation just last week with a co-worker who is going broke putting her son through college. He is a good kid, but just expects her to pay. He hasn't even applied for aid and has no job. I'm not sure when parent started to equate to martyr. My grandparents were not mean people at all but it was pretty much understood that they would raise the kids until 18 and then you were responsible or yourself. My parents certainly helped me how they could but I never expected them to pay for all of my college and I applied for loans. I'm not sure where kids even assume Mom and Dad are responsible. I guess it all goes back to teaching financial literacy from an early age. I want my daughter to know how much we will be able to help, how much school costs, and how much she can expect from whatever career she decided on. If she does go to college and we can pay, that's wonderful. If she picks somewhere outside of our budget, then she'll be responsible for the rest. She will thank me when I'm old and can afford to pay for my retirement expenses.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      I think that's key - parents set expectations with their kids as to how long they would provide for them. Unfortunately a lot of parents today don't set that expectation, then struggle to cut the cord, so to speak. We talk about college with the girls too, not to be unnecessary pressure on them, but for them to understand that it is a privilege. One we would very much to like to help out with but one that also has certain expectations tied to it.
  17. Monday, May 12th, 2014
    Great post, especially about college being a privilege versus a right. One of the best tactics I've ever seen was Erin's (Broke Millennial) dad and giving her a set amount that her parents were going to support her with for college, and her making a choice of where to go, even if it wasn't her top choice (if I recall correctly, the top choice was pretty expensive). Obviously, she's one stellar PF role model now because of those choices both her and her parents made!
    • Shannon Ryan
      Tuesday, May 13th, 2014
      I remember reading Erin's story too. And I love that her parents set clear boundaries with her. Many parents just accept wherever their child wants to go, regardless of cost. Maybe once upon a time that was okay, but these days with the rising costs you really need to make sure the school choice is appropriate for what they want to do. If I recall correctly, she wasn't initially pleased (which is why I think so many parents avoid this conversation) but she came around and today is very grateful to her parents. And a wonderful PF role model to all millennials!
  18. Monday, May 12th, 2014
    As soon as I read the loan, grant paragraph, I kind of chuckled because even though the majority of what we've used so far to pay into our kids college funds have come from free grants, etc., I was thinking if we should be adding more. We're still on our way to funding our retirement, but for a second there, my parenting brain got the best of me. Ha! Great post!
    • Shannon Ryan
      Tuesday, May 13th, 2014
      I remember you writing about that recently. If you can fund your child's education with free money, even better! :) Yes, sometimes our parenting brain's get us to trouble. LOL!
  19. Tuesday, May 13th, 2014
    We prioritize retirement over college savings, but there's no reason we can't put a little bit of money away for the kids each month. We've been saving since they were babies and it has really added up quick!
    • Shannon Ryan
      Tuesday, May 13th, 2014
      Absolutely, Holly! It definitely does not need to be an either/or situation. Even putting a small amount aside will help and it does add up quickly too! I remember you saying that your oldest gets excited when you show her the balance, which I love!
  20. Tuesday, May 13th, 2014
    Great point about there being no retirement loan, which is why retirement saving should be the priority. Although I'm sure most parents will also try to help out their kids. We are saving diligently for retirement, but also opened a 529 plan for our son. He's not even one yet so there's time. But my co-workers who have kids going to college scares me when I hear about the costs. It really is ridiculous and I think the price is unsustainable. My wife and I went to state colleges and the tuition at those schools are at least reasonable, so that's always an option.
    • Shannon Ryan
      Tuesday, May 13th, 2014
      That's great that you've started saving for you son's college education already. Even setting aside a small amount now will make a big difference later. The costs are really high and it can be scary imagining what they will be like when our kids attend. Parents and kids will need to be more savvy when it comes to choosing a college and do more cost comparisons too. Right now, it's more about what college do you like without a lot of consideration of cost, although that is changing due to the rising costs. Cost definitely needs to be a part of the conversation.
  21. Tuesday, May 13th, 2014
    That actually makes a lot of sense. I think if you threw all your eggs and your kid's college basket, you better hope they take care of you if the s hits the f. :) Ok, you know what I mean. Gotta put the oxygen mask on yourself first.
  22. Tuesday, May 13th, 2014
    I was glad to see your answer since I think it's the only right one - you save for retirement before you even think about saving for your kid's college education. You said it - there are loans for college, not for retirement. I also think that college isn't a right. If we have kids, I bet we will help them with college. But they will know that the help is dependent on them taking it seriously.
  23. Wednesday, May 14th, 2014
    Totally agree. It wasn't fun paying off student loans, but I was young, had money and could find more work if I needed to. My parents didn't have money for education or retirement. My dad is 59 and still entirely dependent on his paycheck. The last time he lost his job, he was out of work for a year. As an adult I have had to bail my parents out, and I constantly worry about their well-being. I've watched the home I grew up in slowly decay because they can't afford repairs. It would be a tremendous gift to have financially secure parents instead of watching people I love struggle. My husband and I are saving for retirement and have not yet begun to save for our boys' education. I know they can find a way, but we only have one shot.
  24. Friday, May 15th, 2015
    I know I am going to get old and there will be a time when I can not work like I do now. Retirement WILL happen and I better be ready for it. On the other hand there is no guarantee that my daughter will want to go to college or that she will even finish (lots of students don't, btw). So if I have to choose between retirement (a sure thing) or college (a maybe thing) I am going with retirement.

    Additionally, no one paid for my college education and I was still able to get a degree in business and a second degree in finance at no cost to me (employers paid most of it and I paid for the rest through my side hustle). So there are lots of ways to reduce the cost of college and pay for it without loads of debt.
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan