Navigating Financial Planning: How to Strike a Balance Between Savings for Our Retirement and Our Child's Future Finances?
Saving for both retirement and a child's future expenses, such as college and weddings, requires careful planning and prioritisation. One should not sacrifice their own financial stability to put aside more money for their kids, as securing a stable retirement is critical.
Experts recommend prioritising retirement savings by contributing at least enough to get the full company match in a 401(k) or similar plan, and aiming for the recommended savings rate of about 15% of income annually. Avoiding tapping into retirement funds early is crucial, as it can undermine future financial security.
Creating a comprehensive budget with your partner is another key strategy, helping you understand current expenses and how much you can allocate toward both goals. Tracking and reviewing expenses regularly make saving intentional and realistic.
Starting to save early for both goals is also essential to harness the power of compound interest. Even moderate contributions to a child's education fund can grow significantly over time, supplementing scholarships and income during college years.
Developing a multigenerational financial plan that aligns family values and financial goals around retirement, education funding, estate planning, and wealth transfer can help coordinate priorities across generations, sharing responsibilities and preserving wealth.
Using appropriate savings vehicles, like 529 college savings plans for education and tax-advantaged retirement accounts for your retirement, can maximise the efficiency of your investments. Consulting with qualified financial advisors, estate planners, and tax professionals who specialise in multigenerational planning can tailor strategies to your family’s needs while considering legal and tax efficiencies.
Boneparth suggests starting a 529 plan for children's college education, and advises starting with a savings amount below what is currently affordable, then increasing incrementally. Regular financial checks are recommended to reassess savings plans and make changes if necessary.
Communicating goals clearly with a partner is important for developing a financial plan. Couples should discuss what retirement means to them and what they want for their child's future. Life changes and job shifts may require updates to the financial plan, so it's important to stay flexible.
It's important not to sacrifice retirement savings to prioritise a child's college fund, as personal financial stability is important to be a pillar of stability for children in the future. The future of college costs is uncertain, and it's unclear if they will continue to rise at the same pace or if loans will remain as available. Contributing the annual maximum to employer-matched 401(k) plans is beneficial, if possible.
In summary, securing your own retirement should come first as the foundation of your financial health, while setting up a sustainable and strategic plan to save for your child’s future expenses ensures you can support both goals without sacrificing long-term security.
Start with a savings amount below what is currently affordable for a child's college education, then increase incrementally, following Boneparth's advice. (saving)
Expert recommendations include prioritising retirement savings over contributing more to a child's college fund, as securing one's own financial stability is critical. (personal-finance, finance, saving)
