Saving for Retirement vs Funding Your Children's College Education

There’s no denying that college is a significant financial commitment. The average cost of college in the United States varies depending on the type of institution, whether the student is in-state or out-of-state, and whether the student lives on or off campus.

In 2024, the average cost of tuition and fees for in-state students at public schools is $11,011, while the average cost for out-of-state students at public universities is $24,513.

In 2024, the average cost of tuition and fees for private colleges is $43,505.

In 2022–2023, the average total cost of attendance for first-time, full-time undergraduate students living on campus at private nonprofit institutions was $58,600.

In addition to tuition and fees, the average cost of in-stateroom and board is $12,639 per year.

The total cost of college can also include books and supplies, transportation, personal expenses, clothing, and entertainment. The College Board reports that the average budget for a college student in 2023-2024 is $28,840 for in-state students at four-year public colleges, $46,730 for out-of-state students at public colleges, and $60,420 for students attending four-year private colleges.

Most students borrow money to attend college, with the average federal student loan debt being $37,850. The average student borrower spends closer to 20 years paying off their loans. As college costs continue to rise, the financial strain on families grows.

After evaluating the potential costs, one of the most important steps is to consult with a financial advisor. A professional can help you assess your overall financial situation, your retirement goals, and how much you can comfortably contribute to your child’s education. This comprehensive review often reveals that relying on retirement accounts to fund higher education could put your financial future at risk.

It may become clear that tapping into retirement savings is not sustainable, especially if it will impact your long-term financial security. This is the perfect time to engage your children in the discussion about how college will be financed. A family-wide approach is not only practical but also teaches children valuable lessons about financial responsibility and realistic expectations.

It’s natural for parents to want the best for their children, but the societal pressure to fully fund a college education can lead to feelings of guilt. The rising costs of college make it increasingly difficult for parents to shoulder the full burden, and that’s okay. It’s crucial to understand that retirement savings should take precedence, simply because there are no loans or financial aid options available to fund your post-work years. On the other hand, there are numerous options to fund college, such as scholarships, student loans, work-study programs, and other forms of financial aid.

Parents should also consider what might happen if they make significant sacrifices for a child’s education, only for the child to change their academic path or lose interest in attending college altogether. In such cases, valuable retirement funds may be spent on something that no longer aligns with the child’s goals.

Financial experts overwhelmingly recommend prioritizing retirement savings over college funding, and with good reason. You can always borrow for college, but you cannot borrow for retirement. Ensuring your own financial stability is key, as it allows you to avoid becoming financially dependent on your children later in life.

It’s also important to realize that today’s students, particularly millennials and Generation Z, often take a different view of education. Many of them are open to alternative paths, such as trade schools, online courses, or delaying college to save money. Engaging your child in a conversation about their educational goals and how they plan to contribute financially can foster a greater sense of responsibility and independence.

Working closely with a financial advisor can help you create a plan that balances retirement goals with the costs of education. This may involve exploring strategies such as setting aside savings in a 529 plan, pursuing financial aid options, or encouraging your child to work part-time during college. The key is to find solutions that keep your retirement on track while also providing your child with the education they need.

Ultimately, a thoughtful and strategic approach can ensure that both you and your child are invested in their future without compromising your financial well-being. Prioritizing your retirement doesn’t mean that you’re sacrificing your child’s education — it means that you’re being prudent and planning for both your futures.