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How do i balance saving for retirement with paying for my children’s education?

This is a challenge many parents face today, especially when both are critical financial goals. Proverbs 21:5 reminds us, “The plans of the diligent lead to profit as surely as haste leads to poverty,” emphasizing the importance of thoughtful planning. With careful consideration and diligent effort (along with plenty of prayer), it is possible to prioritize both goals. In this episode, we’ll explore practical and Biblical principles to help balance these responsibilities and ensure wise stewardship of finances for both the present and the future.

 

Examining Priorities

Which is the higher priority: ensuring your kids graduate college debt-free or not becoming a financial burden to them in retirement? From Drew’s perspective, the highest priority is securing your retirement. While helping your children graduate debt-free is admirable, they have options like scholarships, work, or manageable loans to fund their education. However, failing to save enough for retirement could place a significant strain on them later. Prioritizing retirement savings, even modestly, helps you maintain independence and ultimately benefits your entire family. Aim for an “and” approach—strive to do both, but focus more on retirement.

If you’re young or expecting children, consider the “time value of money.” By investing for their education today, you’ll see those funds grow over the next 18-20 years. This is how my kids graduated college completely debt-free!

 

Don’t Go Into Debt for your Kids’ College Expenses!

  • Avoid parent plus loans.
    • A parent PLUS loan is a federal loan that parents of dependent undergraduate students can use to help pay for college or career school: 
    • Loan amount
      Parents can borrow up to the cost of education at a particular institution minus any financial aid the student receives. 
    • Repayment
      Repayment begins within 60 days of final disbursement and can take up to 25 years. There are several repayment plans, including standard, extended, and graduated. 
    • Application
      Parent PLUS loans are credit-based and issued to the parent alone. They’re different from other types of student loans because they depend on a parent’s income. 
    • If a student’s parents cannot get a parent PLUS loan, the student may be eligible to receive additional unsubsidized loans.

The parent’s priority ought to be to use the retirement savings available to you, not for your child. If you work for a company that provides a 401k match, take advantage of that match and start building your retirement savings sooner than later! And in this, reminder, that Social Security income in your retirement years are to be a SUPPLEMENT to your income, not your sole source of income.

 

Preparing for Education

We’ve titled this section “Preparing for Education” because it’s crucial to plan for this expense, not just react to it in the final year(s) before your child enters higher education.

When your children are young, consider setting up a higher education fund and ask friends and family to contribute to that fund instead of giving physical gifts. Start saving early! Here are some options to consider:

  • 529 College Savings Plans: These state-sponsored accounts grow tax-free and allow for tax-free distributions to fund college expenses.
  • Education Savings Accounts (ESAs) or Coverdell Accounts: These offer similar benefits to 529 plans but have income and contribution limits.
  • Custodial Accounts: Unlike other plans, these can be used for non-education expenses without penalties, and the funds transfer to the child once they reach a certain age (varies by state).

Drew: My wife and I used a “Uniform Gift to Minors Account” to save for our kids’ college expenses. The growth over 20+ years covered all their tuition costs!

No matter the age of your kids, if higher education is in the future, you should be saving for both their education and your retirement.

Even if you can afford to pay for your child’s entire education, don’t. What?

They should be working toward—and during—their college years. Your financial support should be tied to their commitment to their education and their grades.

It’s not just about grades but about their involvement in the process. Don’t fund a party lifestyle. If they start making decisions or behaving in a way that doesn’t align with your values, like changing their pronouns or engaging in behavior you don’t support, stop funding their tuition.

 

Don’t Compromise your Financial Future

Don’t mortgage your future to pay for your child’s education. It’s crucial to prioritize both your retirement and your child’s education without compromising your financial future.

When considering education expenses, including Christian schooling if that aligns with your values, remember not to sacrifice your retirement. Instead, find other areas where you can cut back. While you don’t need to max out retirement contributions, it’s essential to save regularly. Take advantage of compound interest for long-term growth.

If balancing both retirement and education savings seems challenging, prioritize a Roth IRA. You can always withdraw contributions without penalties. Additionally, consider a second income (from a spouse or side hustle) to help cover costs.

Don’t hesitate to apply for financial aid, whether for primary or higher education. Take advantage of school lunches, scholarships, and other resources available.

If you have the means, consider supporting Christian education to provide scholarships for families in need.

 

What if you still can’t do both?

What do you do if you feel unable to balance saving for retirement and paying for your child’s education?

As parents, we must find the balance between pursuing the best for our children and being present for them. Don’t turn education—even Christian education—into an idol, as many are doing today. Higher education is a privilege, not a right.

Remember, God can sustain your children in a secular environment or provide a way for you to afford Christian education. Have you prayed about these needs and desires? Instead of immediately turning to loans, seek the Lord first for His provision.

It’s easy to become so focused on earning enough for education that you miss out on the formative years of your child’s life. Strive to balance financial preparation with quality time—don’t sacrifice fun and meaningful moments with your kids and spouse.

We’re challenging parents to do the impossible: save for education and retirement while being present in your children’s lives. Don’t be an absentee parent. And when you’re physically present, be mentally and emotionally present too (put the phone and laptop down!).

Have open conversations with grandparents about your goals, what you can and can’t do, and ask for wisdom and prayer. Sometimes, grandparents may be able to help financially, or even by being more involved in your children’s lives, giving you the time to work toward funding their education.

Not all grandparents are in a position to help, but they have valuable experience and may offer wise advice.

 

Think outside the Box – Creative Options for Education

When planning for college savings, don’t be swayed by the “name brand” schools. Let your choices be influenced by your budget. Consider starting at a community college for the first couple of years, and factor in any available scholarships. Run the numbers carefully.

Remember, education doesn’t always mean a bachelor’s degree. Trade schools are a great option, especially since skilled tradespeople are in high demand. Help your child resist societal pressure to pursue a traditional degree.

Books like Debt-Free Degree and the documentary Borrowed Future offer valuable insights. A degree doesn’t always guarantee a job, so as a parent, let go of the “my kid goes to XYZ school” mentality!

 

Stewardship Application

Life often feels like a juggling act, with more “buckets” to fill than there are resources to go around. Between saving for retirement, funding your kids’ education, replacing a car, and managing day-to-day expenses, it’s easy to feel overwhelmed. The reality is that we won’t always have the means to fill every bucket completely. That’s why it’s crucial to trust God with both the process and the outcome.

God calls us to be faithful stewards, making wise decisions while recognizing that He is ultimately in control. Proverbs 3:5-6 reminds us: “Trust in the Lord with all your heart and lean not on your own understanding; in all your ways submit to him, and he will make your paths straight.” As we navigate financial priorities, our trust must rest in Him, not just in our ability to plan or provide.

Saving for retirement is one area where consistent faithfulness is essential. While helping your children graduate debt-free is admirable, retirement is inevitable for most people, whether voluntary or involuntary. Unlike college, which not every child may attend, retirement is a reality for all workers. If we fail to save adequately, the burden of providing for ourselves in our later years may fall to our children, creating unintended financial strain.

This doesn’t mean neglecting other goals, but it does mean prioritizing wisely. Luke 14:28 encourages us to count the cost: “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?” Just as we evaluate the cost of education or major expenses, we must also consider the long-term needs of retirement and ensure we are preparing for that stage of life, possibly prioritizing it above fully funding your child’s higher education.

Balancing these priorities requires wisdom, discipline, and trust in God’s provision. Save regularly for retirement, even as you invest in your children’s education or other goals. Faithfulness in saving, paired with prayerful reliance on God, ensures that we approach each bucket with thoughtful stewardship while trusting Him to fill the gaps where we cannot. And remember, pray this verse in light of the balance between retirement and your kids’ education: “And my God will meet all your needs according to the riches of his glory in Christ Jesus” (Philippians 4:19).

 

 

Next Steps

 

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The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

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