If you’re like most people, you have more than one financial goal you’re working toward. Saving enough money to retire is often the top financial goal that people think of, but there are often other competing goals that come up during your life.
If you end up having children, you may feel caught between setting aside money for your retirement and saving for your child’s future, such as college expenses or a wedding.
We asked financial advisors how to balance saving for your own retirement with saving for your child’s future. Here’s what they had to say.
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Communicate your goals clearly
It’s hard to develop a plan if you don’t know where you want to end up, so it’s important to talk with your partner about your specific goals.
“Couples should first develop clarity about what retirement means to them and what they want for their child’s future,” says Tanner Merritt, a Certified Financial Planner at Life Planning Partners in Jacksonville, Florida. “Life evolves, so this conversation needs to be ongoing.”
Think about how you and your partner picture retirement and then work backwards from there. That can have a big impact on your spending and saving plans today.
Understand your family budget
“Get a good grasp on your family’s budget,” Merritt says. “You need to know where your money is going before you can decide how much to put toward future goals. Tracking expenses can be eye-opening and sets the foundation for intentional saving.”
Developing a budget is often the first step in building an overall financial plan. It may be helpful to work with a financial advisor when you’re just starting out to make sure you’re on the right track.
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Prioritize your retirement savings first
“You shouldn’t sacrifice your own future financial stability to put aside more money for your kids,” says Douglas Boneparth, financial advisor and president of Bone Fide Wealth in New York. “You really do need to put on your own oxygen masks first, so that you can be the pillars of stability for them — not just financially but in every sense — when they need you as they get older and those big financial milestones arrive in their lives.”
Boneparth, who, along with his wife Heather, is the author of the upcoming book on relationships and finances, “Money together: How to find fairness in your relationship and become an unstoppable financial team,” says it’s important to start by taking advantage of employer matches in 401(k) plans. If you can contribute the annual maximum, even better, he says.
The future of education is uncertain, but save what you can
Helping kids pay for their college education is the No. 1 goal clients hope to give their kids, Boneparth says. But predicting the future of college costs is difficult. It’s unclear if costs will continue to rise at the same pace or if loans will be as available as they are now.
Boneparth suggests starting with a 529 plan for your kids and saving what you can. Even small amounts can add up over time.
“No one’s here to tell you that you need to be contributing so much to those accounts monthly that it makes even your current lifestyle uncomfortable,” he says. “Start with a number below what you can afford, and then increase incrementally to see how your cash flow can accommodate and sustain the increase.”
Check in regularly to reassess your plan
Both Merritt and Boneparth suggest reassessing your plan on a regular basis to see if you’re on track or if any changes are warranted.
“Life changes, jobs change, and priorities shift,” Merritt says. “A regular, financial pulse check can go a long way in keeping everything on track.”
Bottom line
It can be hard to balance competing financial goals such as saving for retirement and your children’s future education needs. Start with a clear understanding of your specific goals and the savings goals your budget can support. Don’t sacrifice your retirement savings to prioritize your child’s college fund. After all, they may need to support you later in life if you haven’t saved enough. Make sure to check in regularly to see if your plan needs to be updated due to life changes.
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