In a perfect world, parents would not have to choose between putting money away for their retirement or saving for their children’s college education. But that’s the unfortunate reality for many single parents across the country.
That was one finding in a recent study by Allianz Life Insurance Co. that examines today’s American family and finances. The study revealed that nearly half (45 percent) of single-parent respondents said their children’s education was their main motivation for creating and implementing a long-term financial plan, compared with just 26 percent of other “modern” families and 39 percent of “traditional” families.
Three in 4 single parents said trying to prepare for retirement and save money for their kids’ college simultaneously is stressful. No surprise there.
According to USA Today, the survey’s single-parent respondents don’t represent the standard income level for single parents, who usually sit closer to the poverty line. Single parents had to have a minimum annual household income of $50,000 to participate in the survey.
Despite being financially stable and having reported better-than-average financial planning skills, the single parents in the survey are still having difficulty trying to prioritize their spending. The Allianz press release said:
“Single parents are forced to solve the retirement equation by themselves, which places tremendous pressure on their ability to find the right balance between saving for their children’s college expenses and saving for their own future,” said Allianz Life vice president of consumer insights Katie Libbe. “Because they are on their own, single parents often lack the flexibility to address multiple goals, and therefore tend to have a more narrow focus on their savings priorities.”
There are serious financial repercussions for saving for college and not retirement. It’s only natural then that the survey found that single parents and other nontraditional families are worried about running out of money in retirement.
“While single parents have several options to help pay college expenses – including grants, scholarships, and student loans – they’re solely responsible for their own retirement savings,” added Libbe. “Depleting their nest egg to fund education costs can be dangerous. To avoid sacrificing retirement savings, a good plan may be to explore college saving and borrowing options first, then determine how those tactics fit with their larger savings strategy.”
If it comes down to saving for retirement or saving for your kids’ college, the answer seems obvious. Save for your retirement! Like Libbe said, there are so many sources of funding available to defray college costs.
Like many other students, I paid for about 98 percent of my college with student loans and a few scholarships. I can’t imagine having had my parents essentially fork over their retirement savings so I could go to school debt-free. That’s simply unconscionable.
Would you save for retirement or put money in a college savings account? Share your comments below or on our Facebook page.
Find the right financial adviser
Finding a financial adviser you can trust doesn't have to be hard. A great place to start is with SmartAsset's free financial adviser matching tool, which connects you with up to three qualified financial advisers in five minutes. Each adviser is vetted by SmartAsset and is legally required to act in your best interests.
If you're ready to be matched with local advisers who will help you reach your financial goals, get started now.