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 kidsâ€™ 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 donâ€™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.