Here’s a list of things that my wife and I have prioritized over saving for our kids’ college education:
- Retirement savings
- Emergency fund
- Life insurance
- Disability insurance
- Liability insurance
- Health insurance
- Setting up wills and a living trust
- Saving for a future house down payment
- Saving for a future car replacement (which actually just happened)
- Traveling to see family
- Saving for things like car maintenance and health care
- Starting businesses
It’s not that we don’t care about our kids having the chance to go to college. We do.
Both of us were incredibly fortunate to have great college educations completely paid for. We don’t take that for granted and we would love to be able to do the same for our own children.
Sometimes the fact that we’re not saving more for college makes me feel like a bad parent. But the reality is that we have limited funds that force us to make decisions about where to put our money and where not to put it.
And when we make the effort to remove the emotion and look at things objectively, it just makes sense to us to put those other priorities first.
Why is saving for college such a low priority for us?
At a high level (and I’ll get into some more detail below), each individual choice to prioritize one of those things over saving for college comes down to three things:
- It’s something we feel is important
- It’s something that could really only be handled by saving or spending now, and
- There are MANY options when it comes to paying for college beyond saving a lot today.
Let’s tackle the last one first.
There are many routes to a college education
Now, before I get into the alternatives, I’ll start by saying that if we had unlimited income we would absolutely be putting away as much money as we thought was necessary to 100% fund our kids’ college education, wherever they wanted to go. It would simply be the responsible thing to do and it’s what we would like to do.
But that isn’t the reality for us, or most other new parents. So we have to make some choices.
So, just how important is it to save money for college? It’s definitely important, but here’s just a partial list of ways that college could be paid for, beyond whatever we have saved up:
- Cash (maybe our incomes are higher by then and we can budget some or all of the cost)
- Student loans
- Our kids getting jobs
- Attending a lower-cost school
There are plenty of other strategies as well and people can get very creative with it. But just from this simple list alone, it’s pretty clear that there are a LOT of options when it comes to paying for college.
While we’d love to save all the money needed to pay the tuition bill, we know that there are a number of really good backup plans.
Those other priorities? They require our money now.
The story is different for those other priorities listed above. Each one of them either requires our money now or has fewer options for handling later, which places a premium on saving for them today.
Let’s take a look at a few so you can see what I mean.
Beyond Social Security (which should provide something but likely not enough to fund our desired lifestyle), our retirement is completely dependent on whether or not we save enough. There simply aren’t other options. We can either save or face the very real possibility of a long, difficult financial struggle in our old age.
And since we know how powerful it is to start investing as early as possible, we put saving for retirement right near the top of our list of priorities.
And here’s the other thing: it’s not selfish to prioritize saving for retirement over saving for college. Because you know whose burden it becomes when retired parents start running out of money? The kids’. I would much rather my child have to take out some student loans than support me financially in my old age.
If you want a simple way to figure out how much you should be saving for retirement, check out this retirement calculator.
I’ve written before about how much I love insurance. I think that getting good insurance is one of the best financial moves you can make as a new parent.
But to me that tradeoff is absolutely necessary. If we didn’t pay for the insurance, our family simply wouldn’t have the kind of financial security we think is important. Forget paying for college. One unfortunate mishap and we might be struggling to put food on the table.
TRAVELING TO SEE FAMILY
This is one where things get a little less black and white.
My family lives in New England. Casey’s family lives in Florida/Alabama. And we’re extremely close with both sides and want our kids to grow up knowing all of them well. That’s just a value decision, but it’s one that’s important to us.
So we have to choose whether it’s more important to spend the money today so that our kids can see their family on a regular basis, or save that money so that we can pay more towards their college education.
And again, for us it comes down to the idea of alternatives. There are plenty of alternatives when it comes to college. When it comes to visiting family? The alternatives are either not visiting or visiting less. Otherwise we have to spend the money. And since we place such a high value on those family relationships, we spend the money happily.
None of this has to be quite so black and white
I’ve presented everything so far as an either/or decision when of course it’s not really like that. You can save for college and still do some of these other things, and in fact that’s exactly what we do.
Gift money for our kids goes straight into a 529 plan we have set up for each. A couple of years ago we used a big tax refund to add some more money into those plans. And until recently we were saving $50 per month towards college. It certainly wasn’t enough to fully fund a college education, but it was a small contribution that would mean something down the line.
But with all of those things listed right at the top of this article, we either spend more on them, save more on them, or would cut out college savings before them.
A lot of parents feel like they have to put college savings at the top of the list of financial priorities. They feel guilty if they don’t, like they’re letting their kids down or they’re not fulfilling their responsibility as a parent.
I get it. I have those same feelings from time to time. But much worse than not saving for college is the habit of making emotional decisions with your money that distract from the real long-term priorities.
You’ll have your own values and your own priorities, and they’ll be different from mine. I’m certainly not trying to force anything on you, and it may make perfect sense for you personally to put college savings higher on your list.
But I do hope this provides some perspective as to why you don’t HAVE to overly stress about college, and why that doesn’t have to make you a bad parent. It might actually make you a really good one.
How have you handled saving for college? Where does it fall in your list of priorities?