We didn’t take out a second mortgage on our home or vow to live in poverty in retirement so we could send our children to college. Instead we made small compromises so we could help our kids avoid taking out college loans without forgoing saving for retirement. According to a recent article by U.S. News & World Report, saving for retirement should take precedence over saving for college. With the outrageous costs of college and obscene student loan debt out there, I couldn’t disagree more. I think parents need to make saving for college as much of a priority as retirement. For us, it was all about planning and making a few sacrifices.
Giving our children a debt-free start
While the U.S. News & World Report author suggests the best gift to give your children is the parents’ financial security, I disagree. I am giving my children the gift of starting out their lives without the enormous burden of student loan debt. I am teaching my children that happiness isn’t tied up in a home with a 3-car garage or a 6-figure retirement income. My children have not demanded to attend a private out-of-state university because they know it would create a financial burden on the family.
Leading by example
Some experts warn that a child can borrow for college, but a parent can’t borrow for retirement. It seems those experts have never heard of reverse mortgages, which is essentially like taking a loan out for retirement. I rather teach my children the benefits of living a debt-free life. We’ve never taken out a home equity line of credit. We live below our means. We could pay cash for college because our children agreed to attend community college. We won’t have to take out a reverse mortgage when we retire because we are savers.
Building wealth at an early age
Without the burden of debt, my children can begin saving for retirement in their 20s. I wasn’t able to save for retirement in my 20s because of my massive student loan debt. My children will be able to watch their retirement accounts grow exponentially by starting in their 20s. Some experts say children who have to make student loan repayments will learn to associate pain with debt. I wouldn’t encourage my children to stick their hands in an open flame so they learn that touching fire is bad.
I’m not going to pretend that young adults including my own children can learn important financial lessons by being stuck with tens of thousands in student loan debt. The truth is that college tuition costs and student loan interest rates are completely beyond the realm of what’s reasonable. With as uncertain as the job market is, it’s not wise for most people to take out student loans. It’s a bad idea for parents and a bad idea for children. Once everyone refuses to pay outrageous tuition costs, the rules of supply-and-demand will force tuition costs down so no one has to choose between college for their children and eating Ramen in retirement.
More from this contributor:
I Refuse to Fund my Husband’s Retirement
Overcoming my Retirement Savings Burnout
My Mid-Life Plan to Save For Retirement