WOOCS 2.1.5.4

Single Blog Title

This is a single blog caption

Children Education Vs Saving for Retirement – Which comes first?

It is a very emotive subject… should I send my children to top-end private schools rather than saving for retirement?  Should I save for their higher education or for my retirement? Off course in an ideal world, you would do both but as someone said to me recently ‘Abraham, this is the real world, what if you can’t do both?’

I know why it is such a tough choice, not the least because we brought our children to this world, we are responsible for their wellbeing and we want them to have better life chances than we did. Most parents (at least the ones I know) are selfless and they sacrifice all for the good of the babies, right? But as emotional as this sound, is it prudent financially?

A central part of the financial coaching model we use with clients is something we call the Baby Steps (designed by Dave Ramsey) and we recommend saving 15% of your income for retirement before saving for children’s education! Here’s why…

  • ‘Put your oxygen mask on before assisting your children’

You’ve probably heard this on every commercial flight you’ve been on, but it’s worth repeating. It is true in event of an emergency on a plane but also when it comes to making tough choices about saving for retirement versus children’s education.

  • Consider the alternatives

There are a lot of alternatives to fund children’s education but the ONLY alternative to saving retirement is poverty in your old age.

Off course there is always the option of State schools. Some State schools are terrible but some aren’t so bad, especially grammars and you can always throw in a few hours of tutoring at home. There are grants, scholarships, part time work at Uni (it’s not child labour, many students work and yet excel academically) and student loans, although I am no advocate of borrowing.  On the other hand, there no ‘grants’, ‘scholarship’ or  loans for retirement, just poverty and ‘working till you drop’

  • Make compromises if you must but don’t sacrifice your retirement

Look for cuts somewhere else. Recently, Funmi and I had a ‘serious’ talk about our daughters first birthday. For Funmi, every birthday is ‘special’ and must be celebrated in grand style. New dresses, a family photo session, cakes and yes, a parry and goody bags for the kids that attend! (Somehow my brain associates parties with expenses; the bigger the party, the bigger the bill. I bet that is not true in real life though, it is just my brain!).  I pushed back. I made the point that I would rather see most of that money go into our daughters education fund. If we end up giving her an Ivy League education but she hates me for not throwing her lavish birthday parties when she was little, so be it. In the end we agreed to a photo session and a ‘small’ celebration.

Don’t get me wrong, I am not allergic to parties (as long as I’m not paying for them). All I am saying is, when it comes to funding your children’s education, let something else suffer, not your retirement!

  • Your children are NOT your retirement plan

My associate Dipo always says to clients ‘you were once your parents’ retirement plan but how is that working out for them?’  The fact is if you don’t save for your retirement, you will end up being a burden to your children and others. Who says they are going to prioritise your needs over theirs?

In fact by the time you reach your retirement age (say late 60s to early 70s), your children are going to be in their 30s and 40s, which is the peak of their family life. They will be pressed on every side by responsibilities; taking care of their own children and saving for their own retirement are more likely to be of higher priorities for them than taking care of you in your old age. That is hard to swallow (and my fingers hurt as I type this) but it is true.

So do your children a favour: save for your retirement! Start now! Even if you don’t do it for yourself, do it for THEM!

We’ll like to know what you think. Do you agree?

Leave a Reply