Just about every new parent I’ve ever worked with has told me that saving for college is one of their top financial priorities. And I always have some mixed emotions when they say it.
On the one hand, it’s great that they want to prioritize saving for their child and giving him or her all the opportunity in the world. It’s especially admirable given that their budget is likely tight due to all the new expenses that come with young children, and that any savings would therefore require some kind of sacrifice.
On the other hand, I know that I’m going to have the tough job of convincing them that saving for college is probably not the right move. That they should be prioritizing their own needs over their child’s college education.
That may sound selfish. And the truth is that saving for college is a great idea IF you have the money to do so.
But when resources are limited, saving for college should usually be near the bottom of your list of financial priorities. Here are three reasons why.
1. There Are Many Ways to Pay for College
While having savings available to pay for college generally provides your child with the greatest number of choices, the fact of the matter is that there are many ways to pay for a college education.
Here are a few of the options you have available to you:
- Cash flow: You might be able to pay for some or all of your child’s tuition as if it was just another bill. This is a big reason why some people argue for paying off your mortgage over saving for college. If you time it right, you could get rid of your mortgage payment just as your child reaches college age, freeing up room in your budget for at least some of the bill.
- Lower-cost schools: While the average cost of a college education continues to rise, there are many schools offering a quality education at a fraction of the cost of the most expensive universities. A good middle ground might be spending a couple of years at a community college before transferring to a more prestigious college, allowing you to save a lot of money and your child to get a degree from the school he or she desires.
- Scholarships and grants: There are all kinds of scholarships and grants available these days. Applying for this money might be a good project for your soon-to-be college student.
- Part-time job: You certainly don’t have to bear the responsibility of paying for college alone. Your child could work either before or during college, or both, to help pay the bills.
- ROTC: ROTC programs can pay for the entire cost of school, as long as your child is willing to commit to military service after graduation.
- Student loans: Done thoughtfully and within reason, student loans can provide a good return on investment, since a college degree can increase your lifetime earnings potential. Regardless, they’re available as an option when other routes fail.
The bottom line is that while saving for college is great if you can afford it, you won’t be left without options if you can’t afford to do so.
On the other hand…
2. Other Financial Goals Require Money Now
Most other financial goals do not have that kind of flexibility. They require you to either spend or save money right now, or risk not being able to reach them.
Retirement is a big one. Beyond Social Security, you are completely dependent upon your own savings in order to support yourself once you either want to or have to stop working.
And given that increasing your savings rate is by far the best way to increase your odds of reaching your retirement goals, focusing on that now over saving for college makes a lot of sense, even if it feels selfish.
Here’s another way to think about it: When you’re on a plane, they always tell you that, in the event of an emergency, you should put on your own oxygen mask before helping your children. You have to stabilize yourself before you’re truly able to help your children.
The same logic applies to saving for retirement over saving for college. By stabilizing your own financial future, you’re putting yourself in a better position to truly be able to help your children with whatever they need down the line.
But retirement isn’t the only consideration here. Things like insurance and estate planning are critical tools for protecting your family’s financial well-being, and they require you to either spend money now or go without them.
Even things like traveling to see friends and family, or changing careers or starting a business, have real value and won’t happen unless you dedicate resources now.
Unlike paying for college, most of these other big goals can’t be handled any other way.
3. There Are Other Ways to Invest in Your Child
For some reason, our culture has a laser focus on college as THE way to invest in the future of your children. And while a college education is certainly valuable, it is only one four-year period of your child’s life and is by no means the only way to prepare him or her for the future.
Simply spending time with your child is one of the best investments you can make, and doing so might require working fewer hours, making less money, and therefore having less available to save. And in many cases, that trade-off will undoubtedly be worth it.
There are also plenty of opportunities to help them explore their interests and develop their skills long before college is even an option. In fact, research shows that early education in particular has a number of significant benefits, so it may actually make sense to focus more on that time period than on college.
Regardless of how you do it, just remember that your child has a long life with lots of opportunities available to him or her. And while college may be an important part of that life, it will only ever be one part, and there are many other ways to invest in your child’s health and development.
Don’t Feel Guilty About Making College a Lower Priority
The urge to start saving for college right away is a good one. It means that you care about your child and that you’re willing to make sacrifices in order to secure his or her future.
But you shouldn’t feel guilty about making it a lower financial priority. The fact of the matter is that other responsibilities require more of your money now, and that by handling those responsibilities you’re actually building a stronger foundation that will allow you to more sustainably help your child later on.
Choosing not to save for college right now doesn’t make you bad parent. It might actually make you a good one.
Matt Becker, CFP® is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families.