Saving for College

Written by nickel - 4 Comments

I just ran across an article by Suze Orman on saving for your kids’ college education. Pretty run of the mill stuff, but good advice just the same. The take home lesson is that you need to prioritize your investment needs, and that you shouldn’t rank saving for college ahead of some other critical areas.

According to Orman:

“You need to listen up here: You must take care of your other financial needs before you save one penny for your kids’ college educations. That means getting rid of your high-rate credit card debt, contributing enough to your 401(k) to get the maximum company match, saving up for a home if you don’t yet own one, funding a Roth every year if you meet the income eligibility requirement (under $95,000 for a single tax filer, $150,000 for married couples filing a joint return), and saving up an eight-month emergency cash fund. And when all of that is done, go back and max out on your 401(k) contribution and save a bit more for retirement in a regular taxable account.”

While opinions vary on issues such as the size of your emergency cash fund (eight months is on the high side of most recommendations), Orman makes a number of good points, particularly with regard to retirement savings… After all, your kid(s) can always get financial aid to help pay for college, but the same can’t be said for your retirement.

Published on May 13th, 2005 - 4 Comments
Filed under: Saving & Investing
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Comments (scroll down to add your own):

that seems to be a total rip from an article I read on Motely Fool, http://www.fool.com about a year ago…

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it said the same thing you said too “It may sound selfish, but there are financial aid, scholarship, and student loans for your kid’s tutiion. There aren’t any of that for your retirement!”
Comment by Cap — May 13th 2005 @ 9:21 am
Speaking as someone who paid for her entire college education (because my parents could only afford to give me minimum help), I’m glad I did it that way. Kids who have to take a large part in their college expenses getwhy they’re there and don’t think it’s a 4 year all-expenses–paid-by-parents-party!
Comment by LibraryLady — May 13th 2005 @ 11:30 am
Interesting post. Great to keep things in perspective and not ignore one aspect for another. Thanks for the tips.
Comment by The Complimenting Commenter — May 14th 2005 @ 4:40 pm
I could not agree more. I would also add that a college savings product should be safe, match college inflation and provide tax benefits.

I would also suggest achieving some of your goals concurrently. In other words, you can save for college while saving for retirement. something to think about as they are both important.
Comment by Dan Davenport — Feb 22nd 2006 @ 1:12 pm