September 2010

We teach our children to share, to find the joy in giving, and that the world doesn’t revolve around them. Just as we try to model the social behaviors we want our children to take into adulthood, financial ideas and habits start developing at a young age. Whether we are conscientiously teaching them or they are merely observing our dealings with money, they are learning.  However, I’m about to tell you to be selfish and teach your kids to do the same.

As parents we want the best for our children, but do we want to leave them with the financial burden of caring for us in our later years? We cannot sacrifice our retirement savings to “benefit” our children. I watch people put off their own retirement savings to put money in a college fund, pay for an extravagant vacation, or buy a new car, but who is going to pay your bills when you retire? Unless you plan on retiring in the next few years, the only thing you can be certain of is that the future of social security is uncertain. And with an enormous and continuously mounting national deficit we cannot expect the government to cover our expenses in retirement.  So assuming you are debt free and have a comfortable emergency fund, what should you do with the extra money you have each month?  First and foremost you should be putting money in a retirement fund. Yes, this means before you contribute to a college savings fund. If you work for a company that matches some of your 401k contributions, start there until you receive the full match (it’s free money!) and then put any other money you can into a Roth IRA*.  Once you maximize your retirement investments, then you can start putting money away for college.  Remember, your children can always get loans and scholarships to help pay for college, but nobody is going to give you a loan to pay your monthly bills in your retirement years.

*assuming you are eligible to contribute

(photo by scottwills)

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