Parenting Mistake #1 :: Ignoring Their Retirement

Yahoo has an article discussing how overspending on kids can risk your financial future.

In that article they discuss four common mistakes that parents make with regard to spending on their own kids to the detriment of their own financial well-being.

Over the next few days, I am going to list each one of these mistakes and provide you with my thoughts and comments on each of these mistakes.

Parenting Mistake #1 :: Ignoring Their Retirement

“Every new parent seems to jump into 529 plans before their babies are sleeping through the night,” says Allvine. “They don’t look at the trade-offs in their own financial lives — specifically getting themselves out of debt or funding their retirement — as higher priorities than college education.” Borrowing for school, after all, is easy and relatively cheap, compared with other kinds of debt. Remember, the kids can always take student loans, while no one will give you a loan for retirement.

This may not be obvious at first as a parent’s first instinct is often to care for their child and ensure their well-being. However, when it comes down to saving for your child’s college education versus saving for your own retirement, you really need to look out for yourself first.

The reason it is important to put yourself first in this case is because your child can obtain loans to cover the cost of their education but you will not be able to get a loan to cover your retirement. While I can appreciate the fact that you want to provide for your child, you will likely do them more of a disservice by planning poorly for your own retirement.

Without proper planning, your *golden* years may very well be spent relying on your children to help cover your costs and assist you with your living expenses. When your child is first born and you want to begin saving for their college expenses, it is hard to think that far forward but it is imperative to plan for your retirement before thinking of college savings.

Before planning to help your children with their college education costs, please be sure that you have planned for your own financial security in your retirement years.

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3 Responses

  1. Derrich says:

    I’m writing about this very thing (only a portion related to your post)…and it’s so true. Borrowing for college is cheaper than borrowing for just about anything else. Great post!

    • mnc says:

      Thanks Derrich! When I graduated college, I had about $18k in student loans and kept on the standard payment plan almost to the end because the interest rate was so low.

      With discounts for things like timely payments and auto-debiting the payment, my interest rate had dropped to about 2%. At that point, it was more advantageous to keep the funds in savings than to pay off the balance.

      Although I eventually paid off the final amount to rid myself of my last non-mortgage debt even though I still had a little over a year of scheduled payments.

      Looking forward to your post!

  2. What!?? I had kids as my retirement plan. 🙂

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