As most people are only too well aware, the cost of further education in the United States has sky rocketed over the years, with many people now struggling to afford college and university. Many others are leaving with huge levels of debt and in many cases parents are having to help their kids with college costs. However, experts are urging parents to think twice before doing this, as they are running the risk of leaving themselves in financial stress particularly when it comes to retirement. One official said that parents needed to make sure they have adequate funds for themselves because although people could borrow money for college they couldn’t borrow money to fund their retirement.
This poses a very difficult choice for many American parents because they either risk their retirement money by paying for their child’s education or they risk their child’s future by making it more difficult to get the education they want and need for a brighter future and more successful career. However, one expert said that parents that were paying for a child’s education rather than making sure that there was enough money to fund retirement was like being on a plane and putting a child’s oxygen mask on before their own.
Assessing the situation
One finance expert said that it has become increasingly important for parents to ask themselves a number of key questions before making any decisions in relation to this difficult matter. The first is to determine how much they can afford. In order to maintain their standard of living parents need to ensure that their retirement savings are sufficient to replace at least 80 percent of their annual income. By working backwards based on these figures, parents can more easily determine how much they can realistically afford to spare for their children’s education.
Another important thing for parents to consider is whether there are other steps that they can take in order to free up money each month to put towards their retirement savings or child’s education. This could include steps such as refinancing a mortgage and getting a better deal, which could essentially save some people hundreds of dollars on a monthly basis.
Finally, parents need to ask themselves what the alternatives are for funding a child’s education. For example, some may be entitled to free financial aid, which means that they can get the education that they want without having to put their parents’ retirement on the line.