Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=41031
Story Retrieval Date: 7/25/2014 8:41:25 AM CST
Americans are split almost down the middle when it comes to choosing between what is most important: saving for their children’s college education or for their own retirement.
According to a survey of 3,188 adults responsible for a child's education, 43 percent said saving for college was more important, while another 43 percent said retirement saving should take precedence.
The survey was conducted by independent research firm Rasmussen Reports, LLC for Bloomington, Ill.-based Country Insurance & Financial Services Inc.
“The survey results may look like a competition is going on between retirement savings and savings for children’s college education,” said Keith Brannan, director of the financial security office at Country, but "if people plan well, it's possible to afford both."
The survey showed that young parents between the ages of 18 and 29, and households with annual income lower than $40,000, are more likely to favor college education savings over retirement savings.
The reason for this could be that young parents feel retirement is far off and not as pressing as funding four years of education, said Mary P. Deshong-Kinkelaar, CFP practitioner at Chicago-based Kinkelaar & Associates Co.
Also, parents with lower incomes may be more aware of class and income differences based on education levels.
“People want their children to have a better life, which is understandable,” said Deshong-Kinkelaar.
About 78 percent of survey respondents viewed college as a good investment and 62 percent said they plan to take full or more than half of the responsibility for funding their children’s college costs.
“Parents often take the burden entirely because of guilt or [their children's] sense of entitlement. It’s not our children’s fault that we haven’t saved enough money,” Deshong-Kinkelaar said parents tell her.
But the reality is that “retirement comes first since there’s no scholarship for retirement” as there is for education, said Brannan.
Brannan recommended evaluating a family's financial situation with a financial advisor, or simply using online tools, such as www.savingforcollege.com and retirement calculators that are available on many financial Web sites, such as www.fidelity.com.
Steve Johnson, managing director of Retirement Solution Advisors LLC. in Chicago, said, “Families may have different priorities as different times. For example, a vacation home might be an obstacle for saving, but the bottom line for them is following through on a savings plan month-to-month.”
Deshong-Kinkelaar said many of her clients finally get the urge to save for retirement when they are in their late 30's or early 40's, but then they have to play catch-up.
Establishing healthy savings habits early on not only benefits parents after retirement, but also has a long-term positive impact on children's attitudes toward money, said Deshong-Kinkelaar.
“Since few people have a chance to learn personal finance in high school, most people learn from their parents,” she said.