Single Parents: Saving for College or Retirement?

Single Patents: Save for education or 401(k)?by Cory Schmelzer San Diego Wealth Management

Modern families have every structure imaginable.  However, single parenthood is definitely on the rise.  In 2013, over 25% of all U.S. households fell into the category of “Single-Mom” families, and another 6% were considered “Single-Dad” families.

With single parenthood, often come conflicting savings goals.  In fact, a recent study by Allianz showed that 47% of single moms say saving for their children’s education is their No. 1 greatest motivation for developing a long-term financial plan — above saving for retirement.  Compare that with just 26% of other modern families who say the same.

Don’t forget: parents have a very limited amount of time to save for retirement, while kids have time on their side.  College kids have the opportunity to get loans and grants, pay them off during their working lives, and still have plenty of time to save for their retirement. Interest rates are extremely low.   Parents, on the other hand, have a much shorter period of time to save before they need to retire.

So, don’t neglect your 401(k).  Once you have that fully funded, then save for the kids’ education.  Remember that Financial Aid formulas typically do not count retirement funds.

It’s like putting on your own financial oxygen mask first, then assisting your children.

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