Kate Is Clueless About College Savings vs. Retirement Savings

Okay, the title is not exactly correct.  I’m not clueless about college savings, or retirement savings.  I am clueless about the ways in which families make their choices.  I don’t claim that there is any “right” way to save, or not save, for a child’s college education and/or for retirement.  However, when some people tell me the reasons that they’ve made certain decisions, I do feel a little befuddled.

For example, a recent comment got me thinking.  I’m going to edit it a bit to protect the identity of the author, but I’ll make sure you get the main points.

We just rolled our daughter’s 529 over into USAA (their financial advisors are salaried, non-commission based). This way we can automatically deposit money into her account every month.

My parents never saved for my college & as a result left me with $125K in student debt. My dad always made sure to pay into his 401Ks, annuities, pensions and such at the various oil companies that he worked at over the years and when he died 3 years ago, I was left paying over $6K in taxes on my inheritance. His priorities were skewed. Just like the old business adage says “Take care of your customers and they’ll take care of you” well I believe if I take care of my daughter, she’ll take care of me. I believe it’s irresponsible for parents to not save for their children’s education.

I disagree with many of the things said here.  It is great that this family has set up a 529 for their child, and of course I approve of their move to USAA, but the second paragraph just doesn’t sit right with me.  I know I am going to offend this reader, and I apologize, but I want to open up the discussion to everyone.

First, I can not imagine how the reader’s parents “left her with $125K in student debt.”  It was the reader’s choice to go to college, and it was the reader’s choice to take out student loans to fund that college.  There are 101 ways to go to college without going into debt.  You can work first then go to school, you can go to the community college first, you can get a job that has tuition benefits, you can apply for scholarships and grants, you can babysit and mow lawns and lifeguard.

Second, from the narrative, it seems like the reader’s parents were financially independent until they died.  Lucky reader!  Being financially responsible for an aging parent is a huge burden, and it often hits at exactly the time that the children are raising their own children.  If a parent has done what they could to prepare for retirement, and still needs help, it is awesome if the kids can help.  However, it is fabulous gift when parents can prepare properly and not be a burden on their children.

Third, waa!  The reader had to pay $6K in taxes on an inheritance.  I’m sorry, that is a sad complaint.  Again, it is a gift when anyone receives an inheritance.  Why not just be delighted and thankful?

Fourth, I completely disagree with the reader’s opinion that “it’s irresponsible for parents not to save for their children’s education,” especially when she has tied this together with the idea that the child will be responsible for caring for the parent in the future.  Perhaps this is because I have four children and the reader has one, but I think it is more of a philosophical difference.

I have told my daughter’s that Mom and Dad will make sure that we are not a financial burden on them when they are older, and we will absolutely do everything we can to help support their educational pursuits within our financial abilities at that time.  However, they are expected to work hard, get good grades, apply for scholarships, and make educational choices that are consistent with our family’s financial situation.  If this means that they go to a state school vs. a private college, or have to put off grad school until their employer will pay for it, that’s OK.  If it means spending summers on top of the lifeguard chair instead of in the pool, that’s OK, too.

So, I’m curious.  I know this is a subject that has a bjillion different thoughts, and none of them are wrong.  What is your opinion on college savings alone, or college savings vs. retirement savings?

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • Sharon

    You are absolutely right on all points. I think parents have an obligation to raise their children to be independent, and it’s not fair to set them up as caretakers for your own later years. Helping kids with school finances within your own budget is lovely, but parents should not sacrifice their own retirement savings to do so. It’s an old saying but true: you can get financial assistance for college, but no one wants to give you a loan to finance your retirement. Your statement about 101 ways to pay for college without going into debt is absolutely correct, but so many people expect things right now and without any thought of the financial consequences down the road.

  • Tracy

    This letter is absolutely indicative of the entitlement attitude that many people have. You are not entitled to go to college or to go debt-free. At 18 I was a legal adult. I did not expect my parents to support me as an adult and they were not in a position to help me with college. I worked three jobs to have enough money for college and eventually joined the Navy so that I could go to school. Now that I’m the parent, my children know that I will do everything in my power to help them through school, but any child of mine who demands that I pay their way through school can join the military and make the sacrifices I did to fund their education. I owe my children a roof over their heads and food and clothing and love, but I do NOT owe them a college education. Especially not at the expense of my house (many of my friends have taken out second mortgages to put their children through school) or the expense of my retirement and financial stability. I am entitled to benefit from the sacrifices I’ve made and the hard work I’ve put into my career and there is nothing selfish about that.

  • Anom

    I find this to be a trend of this generation that capable parents are raising incapbale children by doing too much for them. The cost of education can be mitgated by choice. Aging parents is just what comes by way of your hereditiy and other factors and that can be costly. Most people plan for a healthy retirement but not for the medical burden at the end of life. In the 90’s my aunt and uncle lived one year longer than the doctors said and cost 250K in care (and worth every penny). They had planned for this. 250K on top of mortgage, cars, and kids. will leave you enslaved for life.

  • Christina

    NOPE. This may sound weird coming from a woman, but I had to work my butt off and still do to try to get my degree–being handed things does not build character and I think that if it was watching out for my husband and I vs making a college fund for the kids, I would watch out for us first.

  • Shanell B.

    Kate you are absolutely right! My parents did the same thing, they saved for retirement although I went to college. I didn’t have student loans because I worked while in college (preparation for the real world) and got exceptional grades in high school that afforded me scholarships. I have a better appreciate now, instead of blaming my parents for not paying for the education I decided to pursue. That’s right going to college is a business decision, and like all decision there are trade offs but I digress. Now that I am an investment advisor, you can borrow for college you can’t borrow for retirement. In fact you can use retirement investment vehicles ie 401k, IRA to pay for college.