College Savings or Retirement – Which Do You Save For?

It’s always been a big subject of controversy between financial experts. Saving for your retirement and saving for a college education. People seem to be split on what’s more important but there is a lot of weight placed up saving for retirement taking precedence over saving for college. It seems that more people are saving for their golden years as the numbers from recent surveys suggest; however, the same survey suggests that only a small portion of people these days are saving at all. So many households are living from paycheck to paycheck and struggling just to pay bills that there is often no room for saving cash, even people with household incomes over $100,000 were having trouble setting aside cash. Experts do agree on one thing for sure, no matter how much money you make, you will need to find a way to put aside at least some cash for your future, even if you can’t afford to save for your children’s academic future.

For parents who have children on the road to college, the best savings plan still seems to be the 529 college savings plans. But there are still a lot of consumers who can’t save for both college and retirement and there are even more people who truly do not understand exactly how a 529 plan works. Once a 529 plan is started, there are a number of options for the money should a child not go to college. For instance, the money in the plan can be changed to another family member who will be attending classes in higher education. Parents can also use the cash if they are planning a career change and need to go back to school, even during their retirement years. If there is no other member of the family that can not use the 529 plan money, the money can be withdrawn albeit with penalties and taxes.

Additional benefits for contributing to a 529 plan for college savings include the income tax break you can get in many states. Even if you can’t afford a lot of money split between savings and retirement, having money in both investments is a wise idea. Budget your money and cut spending to find “extra” money to tuck away for your future. Remember especially that it never too early to start saving but it could be too late. The younger you are when you start a savings plan, the longer you have to add up smaller amounts. You can make savings even easier by visiting your human resource department and signing up to automate a portion of your paycheck each time. As a general rule, money that is out of sight stays out of mind and you stand a better chance of leaving your savings accounts alone.