You can't finance your retirement

I have so many topics rattling around in my brain that I started a word document so I could remember what I want to tell you.  The challenge is finding the time to share them all.

One thing that seems recurring in my casual and deep conversations with you all is the need to save for your children's college education.  Some of you even save for their education before or instead of your retirement.  I know why you do that.  It's because people like me in the financial services industry told you how important it was.  Well, I don't think it is that important any longer.  And truthfully, I haven't been drinking that kool-aid for a while.

Here's the deal.  Your kids will figure it out.  You do not OWE them a college education. Yeah, I get that you don't want them to have exorbitant loans and you want them to have every opportunity.  I do understand.  I am not cold hearted.  What I am is practical.  According to the U.S. Dept. of Agriculture "The cost of raising a child from birth to age 18 for a middle-income, two-parent family averaged $226,920 last year."  Wow!!  Roll that number around in your mouth for a while.  A quarter million dollars per child.  I have  3 to get to 18 still.  If that number is accurate then we will  have spent over three-quarters of a million dollars. Yeah, I'm not feeling obligated after that lol

All philosophical differences aside, the sooner you start saving for your retirement the better.  You will need to put less money aside monthly the younger you are.  Here's an example from http://www.bbt.com/bbt/Financial-Education/Savings/Sooner-Rather-Than-Later.asp

Just consider the difference between saving $300 per month at age 30 compared to age 40. Simplify the example by ignoring taxes, and assume you earn 6 percent on your money. If you start at 30 and continue until age 65 (420 months), you will accumulate $427,413. If you wait until age 40 and continue to age 65 (300 months), you will only have $207,898.

What about the difference between saving $300 and $350 using the same assumptions?

 

Monthly saving	Starting at age 30	Starting at age 40
$300	$427,413	$207,898
$350	$498,648	$242,547

 

So as you can see from the example (remember it is JUST an example and there is no guarantee of any results), it is better to start sooner rather than later. And if you are putting money aside for your children's college education, chances are you aren't saving for your retirement to your full potential. If you are Woo-Hoo! for you. Then keep saving for the rugrats. If not, please rethink that decision.

Here's another thing to think about. I am not opposed to helping my kids out when it comes to college. But helping them out when they get there is more our goal.  We will help with books and food.  By that point, we won't "need" to save as much for our retirement because we have started early.  We may be able to free up some of our cash.

You may not agree with me and that's okay. That's not the point.  The point is to get you thinking.