A Balancing Act – Life v. College Savings

I knew having children was expensive, but I underestimated HOW expensive. Diapers, doctor visits, new clothes every few months, and added groceries were all expected. What I wasn’t fully prepared for was childcare. Childcare can make it feel as if you’re already paying college tuition. Are you 18 months or 18 years old? My wallet can’t tell the difference. Hearing about skyrocketing college costs and the importance of starting to save now, might leave you feeling even more discouraged and overwhelmed. I’m right there with you.

I’ve been guilt stricken about already falling short on college savings. Not saving early means that I’m giving up valuable time my investments could use to compound and grow (time value of money). Another reason I feel guilty about the lack of college savings is because my parents were able to fully fund public in-state tuition for my sister and I. Why am I falling behind and not able to do the same? After all, I had a head start compared to my peers. Did my parents sacrifice their retirement for me? Should I be factoring in helping them down the road? How do I achieve this with housing, childcare, and education costs insanely outpacing inflation? Oh yea, and I forgot to mention healthcare. Am I selfish for wanting to enjoy life too? Should we cut out all “frivolous spending“?

Chances are you might be feeling the same. Hillary Hoffower details seven ways life is more expensive for millennials. And shocker, all the expenses mentioned above made the list. She writes:

“Rent, home prices, and college tuition have all increased faster than incomes in the US, according to research conducted by Student Loan Hero…The cost of childcare and nursery school increased by an average of 2.9% annually from the end of the recession in 2008 to 2016, surpassing inflation of 1.6% during that seven-year period, The Wall Street Journal reported” (www.businessinsider.com).

Regardless of the situation, overspending and/or new financial realities for a generation, focusing less on guilt and more on establishing a realistic plan for your family is key. Robert Farrington, founder of thecollegeinvestor.com, makes a couple key points I want to repeat here (in case you need to hear it too).

On prioritizing college savings in your budget and financial plan:

“You have to make sure your own financial house is in order before you try to save for your child’s college… I’ve said this hundreds of times – you can’t get a loan for retirement. Make sure you save for yourself first…As a parent, you don’t need to pay for 100% of their school. Maybe you’ll pay for 100% of their public in-state tuition, and the rest is up to them. Or maybe you’ll just have a target savings number, and the rest is up to them.”

Remember, any return on your child’s college savings account (or your retirement account for that matter) will not keep pace with the higher interest rates charged by credit cards or other personal loans. Limiting these types of debt and paying them down fast should be your number one goal. Once your “financial house is in order”, it’s not selfish to prioritize retirement savings over college. While your children will be grateful you helped them pay for college, they’re likely not making financial decisions on the basis of supporting their future family and parents. Your children will also appreciate that you are financially secure and independent later in life. Read below for helpful tips on balancing saving for retirement and college.

ROTH IRA For detailed information visit nerdwallet.com or investopedia.com

Contributions to a ROTH IRA are after-tax which means you can withdraw contributions (but not your investment earnings) at any time, without penalty. This feature allows investors to prioritize retirement savings, but still have the ability to use funds without penalty for educational expenses down the road. A good strategy, for those who qualify, would be to max out an employer-sponsored 401k up to the company match (never say no to free money). Afterwards, contribution limits to ROTH IRAs are up to $6,000 ($7,000 if 50 and older) as of 2019. As of 2019, income must be less than $137,000 for singles and $203,000 for married couples to qualify for a ROTH IRA.

529 PlanFor detailed information visit investopedia.com

Contributions to a 529 plan allow investors to save for college and K-12 tuition tax-free. There may be added tax breaks depending on the state you live. On his website collegeinvestor.com, Farrington includes an interactive map that allows you to view 529 plans available in your state, along with low and high end savings benchmarks by age. His analysis estimates saving anywhere between $96 to $630 per month. Save whatever you can and allow your investments (no matter how small) time to grow. If you aren’t able to make regular contributions consider saving gifts from family and friends (this is how we started our kids’ accounts). You can also sign up for Upromise and earn cash back for qualified purchases on your linked cards that can be transferred to a 529 plan. For those who qualify, the Upromise Mastercard offers 1.25% cash back on every purchase and rounds up purchases to help parents save more. There’s currently a 15% bonus on your total cash back when you link your Upromise Account to an eligible 529 plan. It may not seem like a lot, but even small automated savings can make a difference in the long term.


STASH Invest allows you to start investing with as little as $5. Investors do not receive tax-free benefits, but can withdraw funds any time without penalty. You can use STASH funds for retirement, college, or any other long term savings goal. STASH features include automatic savings and round-up purchases on linked cards. Those who qualify for the STASH debit card earn stock back on purchases to help grow their portfolio faster. You and a friend can earn $5 when signing up using a STASH referral code (click here to sign up with mine, then begin referring on your own). I like STASH because it allows me to automate savings (no matter how small) while prioritizing current expenses and retirement contributions. I can contribute as little as $5 per week or when my purchases round-up. It’s a drop in the bucket, but it helps me keep a positive saving mindset while we’re unable to max out retirement contributions and 529 plans.

Are you worried about college savings? What strategies do you find helpful? Share your thoughts in the comments.