As a parent, you’re in a unique position with your finances. Not only are you thinking about your future, you’re also thinking about your kids’. In addition to running the household and paying bills, you have to divide your finances between your retirement fund and your kids’ college funds. Now, when the cost of tuition is so high, you might wonder if you can retire at all while helping your children get an education. If you aren’t sure how you can make the split successfully, keep scrolling. Here are some tips to help you save over the years.
Know the stats
When you’re contributing to both funds each month, you may feel like you’re already doing something right. But if you’re only putting in $15 to each account, you might be surprised that by the time college and retirement roll around you aren’t prepared for either. You can use an online calculator to find out how much you need to reach both of your goals. Alternatively, financial experts outline a timeline for these funds, recommending you
- devote 10–15 percent of your incometowards retirement each year
- contribute $500 a month to their college fund
Use the right accounts
While any savings is better than nothing, specialized 401(k)s and 529 plans will help you achieve your targets faster. A 401(k) earns a higher interest and is protected by taxes until you withdraw funds. You can also benefit from employer matching if you contribute enough savings to this account. Speak with a financial advisor to learn how much you need to save to qualify.
The 529 plan is another tax-free investment that can earn as much as double the typical interest rate on a basic savings account. Unfortunately, less than 37 percent of parents take advantage of a 529. Don’t be like so many unprepared parents. Open a 529 plan as soon as possible.
Don’t cash in when you need to pay bills or make repairs
When you’re faced with unexpected bills or necessary household repairs, you may be tempted to cash in on your dedicated savings to cover these purchases. While your nest egg may not be up to snuff, these funds may have thousands of dollars just sitting there, waiting to be used. Whatever pressure you’re feeling, don’t withdraw cash from these accounts. Not only will you harm your chances of having enough savings when the time comes, but you’ll also have to pay penalties for taking out money too early.
A far more responsible use of your money is by connecting with an online direct lender like MoneyKey. They offer simple, fast, and convenient alternatives to these funds, so you can avoid paying penalties. Many of the country’s underbanked are turning to their fast-acting cash loans because of how uncomplicated their borrowing experience is compared to the big-named banks. You can get the cash you need with basic financial information and a secure connection to Wi-Fi — no need for time consuming or tedious meetings with a bank manager.
Saving is hard. When your financial focus is split, it’s even harder. Don’t make it any more difficult for yourself by ignoring tips and other advice. Stay on track by using the right financial products to your advantage, and you’ll be able to retire in comfort while your kids pursue a higher education.