You love your kid and you want them to have the best future possible. But you didn’t save anything for their college education and now they’re finishing high school. They got a few scholarships, but not enough to cover the costs totally. Where can the money come from? You look around and then think… “Oh, my 401(k)!”
STOP! Back away from the 401(k). Though tempting, you should think twice before taking money out of your retirement plan to pay for you child’s college.
For one thing, there’s a lot of news out there showing that the majority of American are not saving enough money for retirement. Many don’t have anything saved at all. So if you’re one of the few that’s managed to put something away for retirement, you should leave it alone.
It’s important to realize that aside from consistency, time is the most important factor to growing your retirement fund. Taking out huge amounts will set you behind and it will be hard to catch up. Your kid, on the other hand, has more time on his or her side to save for retirement. You may not like the sound of your child taking on debt to attend school, but the truth is, they will have more time to pay it off than you will have to make up the gap in your retirement fund.
Instead of pulling money out of your 401(k) or other retirement fund, you and your child should do the following:
- Keep looking and applying for for scholarships and grants, relentlessly, every academic year
- Consider less expensive alternatives, like a less expensive 4-year institution, or starting out at a community college and then transferring to a university
- Living at home instead of living on campus to save room and board costs
- Staying in their home state to avoid high out-of-state tuition rates
- Your student getting a part-time job if possible to cover a few costs or at least for pocket money
- Renting books online from websites like Chegg.com, buying them used on Amazon.com or borrowing them from other students, the campus library, or other libraries.
College is expensive and the costs are only going up, from what we see. If you have young children, take advantage of the time and begin saving now. It’s never to early to save for your child’s education.