How To Balance Between Retirement Savings And Your Child’s Education?

Jun 27, 2018 | 1 year ago | Read Time: 3 minutes | By iKnowledge Team

When thinking of a saving for your future two main things come to your mind: securing your finances after retirement and saving up for your children’s education. While we would all like to be able to save for everything, often having multiple financial goals means that you will have to prioritise some goals over the others, as most of us have limited funds.

Even if we start saving early, with the rising costs of education and retirement, we will have to learn to prioritize. Experts and financial advisors have one key answer to this dilemma of, should I put myself or my children first? It is critical to save for your retirement first, as there are alternative ways you can fund your children’s education, but no alternative ways you can provide for yourself during your retirement.

Putting yourself first for you, and your children

As parents our most critical instinct is to put the needs of our children first. However, here it is important to understand that providing for yourself and saving for your retirement, although might seem a selfish decision on the outset, is elementary to securing the futures of all those around you. Making sure your financial future is secure and stable is perhaps one of the best things you can do for your children, they may have to bail you out financially down the road, as there are no alternatives to retirement investing, whereas there are several to pay for higher education.

Retirement financial planning should take precedence over saving for college education as the entire burden of the former is entirely upon you. If you wait until your child finishes his/her college education to start saving for your retirement it might be a little too late to save enough. The most important way to effectively save for your retirement is to start saving early, the magic of compounding should never be misunderstood and the sooner you start, the more you will be able to save for later years.

Understand the alternatives

You are probably thinking: but I don’t need a lot of money when I grow older, I would rather help pay out for my child’s higher education and reduce their financial burden. Parents often cite examples of growing education costs in comparison with the rates of inflation to express worries about the importance of saving for and prioritizing children’s education. However, you need to understand that when someone recommends prioritizing saving for your retirement, they are not asking you to eliminate saving for your children’s higher education. It is merely stating that you should primarily focus on contributing to your retirement fund first, and then save the leftover for your child’s education.

Additionally, it is imperative to understand that there are several alternate ways you can help your child pay for his/her higher education, whereas there are no alternate ways you can use to pay for your retirement. While financially planning for children and their education, look at your alternative options: educational loans, merit and aid scholarships, reduced cost programs are all alternatives which can help fund your child’s education. The same, however, cannot be said about your retirement fund. Furthermore, several financial planners also advise parents to set goals for longer term financial goals and securing their children’s future by investing in child plans. This way not only you make sure some money is going every month for the future of your children: education, house, marriage, but also ensure that your money is well invested and growing.

Think realistically not emotionally

Often parents have an emotional attachment with being able to pay for their children’s education or for financial planning for child which makes it harder for them to think about the issue of prioritizing retirement over education realistically and in a financially prudent manner. If you fail to secure your retired future, you are putting additional pressure on your child as it is much more expensive for children down the road to come back and help you out in your older days to pay for your medical bills, housing and much more, than it would cost you to simply save for your retirement.

As parents we need to take out the guilt of saving for ourselves and rethink of the way we think about retirement investment planning. In fact, by prioritising for the same, you are not only securing your own future, but securing your family’s future as well. Nobody wants to be a financial burden on their children when they are older, and the only way to ensure this doesn’t happen is to start saving as early as possible.

Advt. no.: IA/May 2018/3995

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