Tuesday, April 6, 2010

Saving for retirement vs. your child's college education

A question from formspring: 

What is more important-saving for my retirement or saving for the kid's college education?

A: That all depends on your financial situation but if you're like most people the answer is your retirement.

The reason is simple: your child can borrow for education but you can't for retirement. And depending on your age, the years between new and your children's college graduation could be critical for you in terms of building a nest egg and adding to it with the appreciation you earn on your retirement investments. For example, if you weren't investing in stocks or mutual funds at all from late last year through the first quarter of 2010, you likely missed out on huge gains that could have offset any losses you took in the 2008 market crash.

Every parent wants to see their child do well but you have to remember that life will go on after your child has finished school and started a career. Not having retirement savings could not only harm you, but harm the start you're trying to give your children in life -- imagine how hard it would be for them trying to take care of you in your later years absent the retirement savings you could have socked away?

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