Usually about the time you start to think seriously about saving for your retirement, you're also facing the reality of helping your kids finance their education. You can aim to do both, but don't forsake your retirement livelihood to give your child a debt-free college experience. Retirement savings should always come before your kid's college needs. Here is how you can help finance your child’s education without hurting your retirement finances.
Understand what it takes to retire. Figure out how much money it is going to take for you to retire. Quit guessing about your retirement needs and do the calculation. If you can determine how much you need to put away each year to retire comfortably, then you can figure out what you will have left over in your budget for your kids.
Set up a 529 college savings plan. Sometimes just having a place for the money will be enough encouragement to build up some savings over 18 years. When my daughters were born, as soon as I got their Social Security numbers, I opened up a 529 college savings plan in their names. By having one of these tax-advantaged accounts at my disposal, I always know where to put extra money that trickles in from various places. Having the account also allows me to put small amounts into the account regularly. I'm starting with $25 a month, and I'm working my way up from there.
Encourage college fund contributions instead of gifts. When your kids are first born, your friends and relatives will be prone to give you gifts or even money for your newborn. Take advantage of this money and stash it away for their college savings instead of blowing it on extras for your child. Consider asking your close relatives to contribute to an education fund for a first birthday gift.
Funnel found money into college savings. Make retirement account contributions from the income from your main job. Then put found money towards your kid's education. Found money can be from things you sell, extra jobs you perform, a tax refund, or literally found money in an old savings account. Make college savings the default place to stash all the extra money that comes in over the years.
Assist your kids with their homework. If you can't invest for your children's education, you can at least invest in them. Spending time helping your kids with their homework and assignments could help them to win scholarships to college based on their academic performance.
Help your kids apply for scholarships and grants. One of the best ways to help your kids is to assist them with the financial aid submission process. Invest your free time to help them fill out the applications for scholarships and grants and help manage the process. Also, if they end up needing a student loan, make sure you educate them on what it means to borrow that much money and help them develop a realistic plan to repay it.
Push your kids toward an affordable education. Look into community and public colleges and encourage your child to get a part-time job while in school. Education after high school doesn't have to be expensive.
Philip Taylor is the author of 104 Ways to Save Extra Money. Read his popular blog, PT Money: Personal Finance for more insightful money tips, like his recent suggestions for the best online checking accounts.