The following is a guest post by Adam Hagerman. To learn more about Adam, you can find his bio at the end of the post.

Being a financial coach, I get to hear hundreds of financial stories and each one of them is different.

‘Someone might come to me with $120,000 in credit card debt and feel like theyíre out of options.

The next person might have $120,000 in their savings account but feel overwhelmed as to what to do with that money.

However, there always seems to be one thing that a majority of people ask me about – college savings for their children.

save for kids college

“I Need to Start Saving for My Kid’s College NOW!”

I hear that phrase a lot. I’m talking more than 75% of my clients that have children under the age of 18 say it and it’s usually the first financial goal they mention. Even those with out of control debt say it. It’s crazy!

So what gives? Why is everyone so locked in on saving for their kids college education when their own financial house is a mess?

Personally, I believe that there are a few factors at play.

First, I think that many parents just want to provide more for their children than what they personally received.

Maybe they struggled to get by due to a lack of higher education. Maybe they paid their way through college using student loans and are still paying them off. Either way, they just want their children to have more financial help.

Second, I think that they’re bombarded by the media and/or friends. It’s almost as if they are guilted into thinking that if they don’t pay for their children’s education, they are in some way bad parents.

Finally, I feel like a lot of the pressure comes from within.

One day you have a child and then the next you wake up and they’re 5. Where did all of that time go? It causes a fear in many parents that another 5 years will pass and nothing will be done regarding college savings. They know that the longer they wait, the more they’ll have to save.

Pay Off Your Debt and Save For Retirement First

Many people seek the help of a financial coach because they’re feeling overwhelmed. Their personal finances have spiraled out of control to the point that it can be difficult to even figure out where to start. Because of this, I’ve always worked with my clients in a series of steps. I have them focus on and complete one thing at a time.

The 8 Steps to Financial Freedom that I recommend are very similar to Dave Ramsey’s Baby Steps with a few personal modifications because I feel like the Baby Steps are missing a few things. However, just like the Baby Steps, the Steps to Financial Freedom encourage you to focus on one task at a time. It simplifies your finances and gets you on the right path.

In the 8 Steps to Financial Freedom, saving for your kid’s college would not come until Step 8 – Redefining and Exceeding Your Financial Goals. Want to know what you’ll accomplish before Step 8? You’ll get out of debt and save for retirement.

Eliminate Debt

Eliminating all debt outside of your mortgage can be truly liberating. Just think about all of the extra cash flow you’d have right now if you weren’t paying on your debt. It’s really not that hard to buckle down and get it eliminated.

I was just working with some clients who have about $35,000 in consumer debt and thought they had no extra cash flow to pay it down. However, if they follow the plan that I set out in front of them, they’ll be out of debt in a little over 2 years. They have two daughters who are both under the age of 10 and they’ll still have plenty of time to save for their college education. Will it take a little more to meet their goal? Sure, but they’ll have a lot more cash flow in which to do it.

Eliminating debt also provides you with a guaranteed rate of return.

Let’s say you have $5,000 in credit card debt at 14.9% interest (the average rate in America). If you continue to carry a balance on that card, you’re paying 14.9% each and every year.

If you were to keep that balance on the credit card and save for college costs, you’re more than likely washing out the gain in the college account. That’s also only true if the investment has a gain and as most of you know, that’s not guaranteed. Sure, you can still say you’re saving for your kids college but at what expense? $745 in unnecessary interest cost to be exact.

Save For Retirement

You should also save for your own retirement before funding your kids college accounts. Why? Well, because your kiddos are not going to put food on your table during your golden years.

In retirement, there are no Stafford Loans or a GI Bill. Nor are there scholarships or grants. You may even think that you’ll continue to work through your 70’s doing work that you love. However, chances are good that you’ll be forced to quit working due to something out of your control.

Do you get my point?

There’s always going to be some sort of assistance to get your kids through college but you won’t have that luxury when it comes to your retirement.

How much should you save for retirement? Well, I recommend at least 15% but your number could be higher or lower than that. It’s the reason that I tell my clients to seek the assistance of a CERTIFIED FINANCIAL™ PLANNER practitioner at this stage. They can help you determine the correct percentage depending on what your goals for retirement are.

Your Kids Will Be Just Fine

No really, they’ll be OK.

Even if you have to postpone saving for your kids college to get out of debt and adequately save for retirement, you’ll inevitably start saving at some point. You may not be able to fully fund their education but those gaps can be filled in various ways.

Your kids could go to community college for the first two years. They could apply to every scholarship known to mankind. They could join the military. They could take out student loans. They could work part-time. They could work full-time for a year and save. They could get their employer to pay for it. They could join the Peace Corps. They could even choose not to go to college! I think you get the idea.

If you can eliminate your debt and adequately save for retirement, you’re going to change your family financial tree. That’s going to pay a ton of dividends.

I guess what I’m trying to say is, if you can teach your children the financial lessons that you are inevitably going to learn throughout this process, they’ll be better off. Show them how to create a budget. Illustrate the power of compound interest.

Just empower them to be financially responsible humans. They’ll thank you for that even if you don’t pay a dime for their college education. I promise.

* * * * *

Adam Hagerman is a financial coach who helps individuals and families achieve financial freedom by focusing on one step at a time. One of the first steps that you can take on your journey is to get his FREE 11-part email series, Get Intimate With Your Money. You can also find him on .


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Comments | 13 Responses

  1. says

    It’s never too late to start saving for your kids’ college fees, but it’s only sensible to take care of your own financial security first. I recently saw on the news that around 40% of parents contribute to their children’s education funds and I think the figure is pretty low. If parents play a bigger role in their children’s financial lives, the amount of student debt circulating in the economy would definitely decline, and that makes it a lot easier for graduates to start their careers without the obstacles presented by student loans.

    Great article, by the way.

    • says

      Actually, I would agree with that 40% number. Most people ask me about saving for college but most of them haven’t started. In fact, they haven’t really started anything. It’s almost like they’re paralyzed from doing anything because there is too much to do (get out debt, save for retirement, save for college, etc.).

      Thanks for the kind words!

  2. says

    This is indeed a tricky situation. It’s commendable that people do think about their kids’ future, but they also need to make sure they’ll be in a better financial position in the years to come. Carrying huge debt and not having money saved surely doesn’t help

    • says

      Exactly. Although they are thinking about helping their children with college expenses, if they don’t get out of debt and save properly for retirement, they are more than likely going to hurt their children (financially speaking) later.

  3. says

    Great article.

    My parents paid for my University degree (which I am eternally grateful for). They didn’t start saving for my education till I was already in my teens when they had all their debt paid off, had funds in their retirement, and were close to paying off their mortgage.

    My husband and I started saving for our kid’s education as soon as he was born. We’re debt free and are saving for our own retirement. We agreed that if we find ourselves in a financial pickle, our financial well being takes priority over saving for our kid’s education.

  4. says

    While I do think that college (and graduate work) is become more and more essential, the costs are also getting to be astronomical relative to income. Ultimately, this means tradeoffs need to be made, and the bottom line is that it’s possible to borrow (wisely) for education but that’s not the case for retirement!

    • says

      You know, I think something will need to happen with higher education costs in the near future.

      With the student loan bubble ready to burst, I think many people will begin searching for alternative means to fund higher education. This in turn may reduce enrollment which could force institutions to lower their costs.

      Only time will tell!

  5. says

    Points well-explained. I agree with you and most comments here, one should put in order first one’s financial house before even starting on the college fund or retirement fund. I also believe that every individual, including newly married couples, should have a trusted financial coach, or at least, become finance savvy.

    • says

      You’re right about the financial coach! :-)

      Well, not everyone needs a financial coach but if you are struggling to understand your situation or just need the accountability, it’s nice to have someone in your corner.

      Thanks for the comment!

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