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Save for Retirement First or Children’s Education?

Save for Retirement First or Children’s Education?

Save for Your Retirement First or Your Children's Education?

A while ago, my brother forwarded me this article from the NY Times – Save for Retirement First, the Children’s Education Second. The financial planners advise that it is crucial to save for retirement before contributing to your children’s higher education. Your children have more options for education than you have for retirement. They can get loans, scholarships, financial aid, attend a community college first, or maybe just not go to college at all.

I’m sure it’s smarter to fund your retirement first and your children’s education second, but I’m one of those people that financial planners butt heads with. Currently, we are able to contribute to our 401k and our kid’s 529 plan at the same time. Life is uncertain, though, and who knows how our financial situation will change in the future. If we can’t fund both our retirement and our kid’s education, I won’t hesitate to put higher education first.

*Originally written in 2014. Updated 2021.

Family Tradition

It’s our family tradition to prioritize higher education. My maternal grandparents put their 9 kids through college. They reinvested any extra money in their business and never set aside a retirement fund. Unfortunately, in their later years they didn’t have much money because their business failed. They didn’t have to live in the street, though. Their children sent them money and helped support them in whatever capacity they could. The more well-off kids would send more money than those with less. That’s the original retirement plan the human race had for centuries and I think it’s a perfectly valid plan. Of course, not everyone has 9 kids. It’s better to have a well-funded retirement, but retirees all over the world make do somehow.

My parents also prioritized higher education over retirement. They put 3 kids through college. They were able to save up some money for retirement, but not enough to fund 30 years of leisurely living. We’ll have to help support them when they get older and we are already preparing for that day by asking my mom to come live with us part-time.

So you can see that it’s our family tradition to prioritize higher education. A good education is a ticket to financial security and I want to give our son a good start in life. We’re not sure how the job market will be like in 20 years, but I know having a degree is better than not.

*2021 update – My mom lived with us for several years. Unfortunately, she developed dementia and we decided to move her back to Thailand. My dad is taking care of her at this time and we send them $1,500 per month. That’s $500 each from me and my 2 brothers. Eventually, she’ll need to go to a dementia care facility and we’ll gladly pay for that.

Saving for Higher Education

Saving for higher education is tricky because there are so many unknown factors.

  • Where will our son go to college? An in-state public university is much more affordable than a private university.
  • Can he get scholarships or grants?
  • We started saving when our son was born. We had no idea how much college could cost when he’s 18.
  • What if he doesn’t go to college?

A university education is a very high priority for us so we decided to ignore the uncertainties and started saving right away. I figured it was best to front-load our son’s education fund. We saved about $10,000 per year in his 529 account for the first 3 years. By 2014, we had about $40,000 in his education fund and slowed down a bit after that. Fortunately, the stock market performed very well since then. By 2021, his 529 education fund grew to about $115,000. We’re more than halfway to our target.

We decided to use our alma mater as a baseline. The cost to attend UC Santa Barbara should be around $200,000 in 2029. We’ll continue to add about $4,500 per year to his education fund, but I feel the hard work is already behind us.


Saving for your retirement first is the smart way to go, but sometimes you just have to do what you believe in. If we don’t have enough to pay for higher education, then I would cash out some of our retirement funds to help. The financial planners are right, though. There are many alternatives for the kids these days. Here are just some of them for reference. Our son will have to resort to some of these methods if he wants to attend an expensive private school.

  • Financial assistance from the school and government – scholarships, grants, and financial aid packages.
  • Student loans – if they can get a low rate, then that’s a good option. We can help pay it off later.
  • Stay at home while attending college.
  • Be realistic and avoid touring expensive private colleges if you don’t have the $$$.
  • Don’t have more kids.  Lucky for us, Mrs. RB40 refuses to go through the childbirth process again.
  • RB40Jr can work a bit to help pay for college.
  • Attend a community college for 2 years then transfer.
  • Take online classes. I’m sure this will be a big part of higher education in 15 years. We already got a preview in 2020. Motivated students can learn just as much online.
  • No need to save for graduate school. He can get a job and the company might pay for a graduate degree as professional development.
  • Any more ideas? Leave a comment and I’ll add them here.

From readers

  • Parents can work at the university and get some kind of tuition assistance.
  • Parents pay for 3/4 of the higher education cost and the kid covers the rest. This is a great idea because the kid will have a stake in the game too.
  • You can tap your Roth IRA to pay for college without having to pay the penalty. You’ll still need to pay tax on the amount withdrawn, though.
  • As the cost of daycare goes down, put the difference into a 529. I love this idea!
  • Coverdell Account – you can contribute up to $2,000/year and get a federal tax deduction.
  • Purchase a rental property and use the income to pay tuition.
  • Purchase a condo and have the kid live there and get a roommate to help pay for living costs. After 4 years, you can sell it to recoup the cost and perhaps make a little profit. My brother did this when he was in a Ph.D. program.


Graduation from college without any debt was a huge financial boon for me. I was able to start saving and investing right away and it gave me a big headstart. We don’t plan to leave much to our son and higher education will be it. It will give him a strong foundation to generate his own wealth in life. Some of my friends still owe a ton of money and I really don’t want to put our kid through that.

What about you? Are you saving for your children’s education? Do you prioritize retirement or higher education? 

You can read more about our son’s 529 account here.


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Source: Retire By 40