By Jaymon Meikle, CFP®, Wealth Advisor
College is expensive. According to US News, the average cost of in-state tuition increased by 211% from 2002-2022. It is very likely that our kids will pay much more for their education than we had to for ours.
On the other hand, the same could be said about our costs in retirement versus what our parents had to deal with. According to Yahoo News, the cost for health care alone has doubled since 2002 and will keep increasing as we live longer and longer lives.
Anyone who has flown on a commercial flight has been through the safety briefing before the plane takes off. One of the main points is that if there is a loss of cabin pressure and the oxygen masks drop, it is vital that you put on your mask before you help even your own children. Finances are very much the same – it is vital for you to take care of your financial well-being before helping your children. It is from a position of strength that we can help others without hurting ourselves in the process.
Options for Paying for College
When it comes to paying for education costs, there are many different avenues that can be taken. One option is to take out loans to pay for education. Typically, debt should be avoided when possible, but it can be a useful tool in paying for schooling. For tips on paying for school, check out this blog written by my colleague and rockstar Associate Wealth Advisor Cristina Wiebelt-Smith, CPA.
One additional way to reduce the cost of education that Cristina did not mention is sending your child to a community college for the first two years before moving to a university. The costs for community college on average are much lower than a four-year university. There is a lot of pressure for our kids to go straight to a university, but it will ultimately make very little difference in their education or ability to get their desired degree if planned properly.
You Can’t Finance Your Retirement
The unfortunate reality is that there are no loans that can be used to pay for your retirement, which is why I advocate for saving for yourself first. The burden of getting through retirement is slowly being pushed more to the individual than ever before.
In the past, companies had pension plans that would supply an income stream for their retired employees, but pension plans are a rare benefit these days. Other benefits that past generations have relied on could look very different by the time we reach retirement, such as Social Security.
In the end, it all comes down to setting your priorities and understanding the possible tradeoffs. If you prioritize your financial well-being and retirement, then your kids will most likely need to carry the cost of their education on their own. If your kids’ education is the priority, your kid may end up being your retirement plan. Hopefully this isn’t the case, but I have seen it happen.
The beauty of making plans early and figuring out your priorities is that you can try to avoid any major tradeoffs and achieve all your goals.
If you are wondering what you should do in your specific situation, give us a call at 816-259-5060 or schedule an appointment online.