Dave Says – Which Comes First?

Dear Dave,

 

I just started listening to your radio show a few months ago, and I love your advice. I do have a question about the order of two of the Baby Steps, though. The list puts saving for retirement ahead of putting money aside for college if you have kids. Why do you suggest this?

 

Jon

 

Dear Jon,

 

Setting aside a college fund for your kids is a really nice thing to do, if you can actually afford that kind of thing. But kids can also further their education by getting good grades, applying for scholarships, choosing a school they can afford and working their tails off while attending classes. Trust me, I believe in education. The point is there are lots of ways to get a college degree—or complete career training at a technical or trade school—without your parents saving up and footing the bill.

Taking steps to begin saving for retirement comes before setting aside a college fund for kids, because everyone is going to retire someday. Unless, of course, they happen to die before reaching retirement age. So, in my mind funding retirement is basically a necessity. College, on the other hand, is a luxury. In fact, it’s often not the best route for someone to take when pursuing a career. Tons of folks succeed in life without going to a four-year school, and on top of that, thousands have worked their way through college.

That’s why it follows saving for retirement in the Baby Steps. Should you try to save up for your kid’s education? Sure, if you can. If you have the financial resources to do it, without putting your entire family’s future in jeopardy. But there are many parents out there who, for one reason or another, can’t pay a dime toward someone’s education. And that doesn’t make them bad parents.

The last time I checked, there aren’t any good ways to retire that don’t require getting your finances ready for retirement well ahead of time. And that requires putting aside as much money as possible to live on during your Golden Years. I mean, you can always live off Social Insecurity alone, but I don’t consider that to be a good plan—or a smart one.

Good question, Jon!

 

— Dave