Broker Check

6 Tips for Saving for College and Retirement At the Same Time

October 15, 2020
Share |

Let’s face it: saving money can be a difficult task. Especially when there isn’t a well-defined plan in place. And with so many goals and future events to plan for, where do you start and save for all-at-once?

If you have children, setting them up with a good financial foundation when they head off to college is probably a high priority for you—but if you’re also saving for retirement, it can be difficult to decide how to prioritize your savings and maximize the benefits for the whole family. Below, we’ve outlined 6 tips to help you be certain you are strategizing effectively to keep yourself and your children on the right financial path.

6 Tips if You’re Saving for College and Retirement

Tip 1: “Put on your oxygen mask prior to helping others”

Working with a financial planner can help bring some clarity to your retirement goals, the rising costs of education, and how much you can afford to save for your child’s learning. To help you make sure you’re making the most of your money, it’s best to work with someone that has an idea around the different grants and tuition assistance you may be eligible for. Even just saving 20-25% of your gross income will help you hit your goals as you work to build up wealth.

Tip 2: Keep contributing to your employer-sponsored retirement plan (401(k), 403(b), etc.)

If you’re offered an employer match for your retirement plan, take advantage of it to earn more money and build your account at a faster pace. Matches are not guaranteed, but if your company provides one, it is wise to at least contribute up to their matched amount. It is important to remember that your child can borrow to help pay for their education, but you cannot borrow to provide yourself income in retirement. 

Tip 3: Consider a state-sponsored 529 Plan

A 529 Plan sponsored by the state is a great way to build savings while reaping tax benefits. You can also control, to a degree, the way the investments are managed. They can be used for a four-year college, graduate programs, technical school, or community college, and the earnings are not subject to federal and state income tax. Some states even offer income-tax deductions or credit for contributions. Qualified 529 plan expenses include tuition, room and board, books, and supplies, and the plan can be transferred to a different qualified beneficiary without penalty or taxes. In addition, families can now withdraw up to $10,000 per year from these accounts tax-free to pay for K-12 education expenses.

Tip 4: Search for alternative ways to pay less tuition 

If your child takes more Advanced Placement (AP) programs in high school or can find some transferable online courses, it will reduce the time they will spend at a four-year university. This will reduce your bill not just on each semester’s tuition, but also on secondary expenses such as room and board, meal plans, and books—just make sure the outside credits will transfer before

enrolling in any courses outside of your child’s school. You may end up saving between $1000 to $3000 per semester with this strategy. Additionally, if your child goes to a local university, you could encourage them to live with you for the first year or two and move to campus in the later years, which could save thousands of dollars over time.


Tip 5: Tell your child to study hard AND work hard 

If your child has the standard 12-15 hour course load per semester, they may be able to fit a 20-30 hour a week job in the mix. This will allow them to have the means to assist with the tuition bill, having the added benefit of making them feel like they have some skin in the game. If they are working hard to pay for college, just like you did to save for them, they will feel less inclined to take those “free classes” like horseback riding and pottery and will opt for more curriculum-oriented courses. Learning how to be a good worker is just as important as being a good student!


Tip 6: Provide help only if you are “financially fit” 

Financially fit means no high-interest debt, good savings balances, and a plan to continue that trend. Don’t kill your balance sheet or run yourselves into the ground trying to afford a life for your child. As a financially fit parent, you may be able to help your child while they are in school by writing checks for them each semester individually. This will allow you to really boost your retirement accounts and personal savings early on so you’re in a better position to help them when they actually step foot on university grounds. 


If you need assistance prioritizing savings, building your retirement fund, or helping your child save for college, we are here to help. Contact us today for personalized, comprehensive solutions to your financial management needs.