Raising kids is expensive—there’s no way around it. As a financial planner, I hear this concern all the time, and I feel it personally. The sticker shock starts early with diapers and formula, and the list keeps growing—sports, new clothes, extracurriculars, and driving and insurance. And that’s before we even start talking about the possibilities of private school and college expenses.
The financial pressures of parenting can feel like a constant tug-of-war. You want to provide for your kids, give them opportunities, and set them up for success. But at the same time, you have your own future to consider. If you put every extra dollar toward your kids’ needs, you could be jeopardizing your own financial security.
The Balancing Act: Kids’ Expenses vs. Retirement Savings
Every so often I’ll find parents prioritizing their child’s education savings over their own retirement savings. My conversation with them often goes something like this: I get it—we all want the best for our kids, and nobody wants their child to be saddled with student debt, but the truth is that there are other ways to finance college, including that dirty little four-letter word, “loan,” but there’s no loan for retirement.
A good rule of thumb is to make sure your retirement savings goals are on track before putting significant funds into a 529 college savings plan. I generally tell clients to max out their 401(k), 403(b), or IRA first. Then, if there’s extra, funnel that into college savings.
Teaching Kids Financial Responsibility
We should also acknowledge this is not necessarily a scarcity conversation. As kids get older, it’s important to start involving them in financial conversations. I know parents who take different approaches to teaching responsibility—some cover all expenses until their child graduates, while others have their kids contribute to car expenses, gas money, car insurance, and even college tuition.
Whichever approach you take, I favor having a grown-up conversation with your kids about money. Before deciding where to go, kids should understand the actual costs and what they mean in the long run. What’s the tuition difference between an in-state and an out-of-state school? How will different majors affect future earning potential? If you’re looking at an expensive private school, is there a clear return on investment to justify the additional expense? These are crucial conversations to have before committing to big financial decisions.
What Happens If You Pause Retirement Savings?
Many parents assume they can just "pause" their retirement savings for a few years while covering big-ticket expenses like college tuition. But this could be a risky move.
Let’s say you stop contributing to your retirement account for four years while your child is in college. Not only do you lose out on those contributions, but you also miss the compounding growth of those investments. Depending on your age and risk tolerance, you may need to adjust your portfolio’s aggressiveness to make up for lost time.
Before making that decision, ask yourself: Will you still be able to retire at your target age? If not, how will you bridge that gap later? Are you okay working longer than you’d originally anticipated?
The Oxygen Mask Rule: Secure Your Future First
It’s the same concept we hear on airplanes: "Secure your own oxygen mask before assisting others."
The same applies to financial planning. If you prioritize your retirement savings now, you’ll be in a much better position to help your kids later—whether that’s with college, a home down payment, or other big milestones.
If you’re ahead in your retirement savings, great! You can always shift some funds to help with education or other expenses. But if you neglect retirement now, you can’t go back and make up for those lost years later.
Finding a Financial Plan That Works for Your Family
At the end of the day, every family’s financial situation is unique. What you can responsibly afford and what you are willing to commit to are two variables unique to you. The key is to plan ahead, set clear expectations with your kids, and find a balance that works for your family.
Want to talk through your financial plan? Let’s sit down and make sure you’re on track for both your kids’ future and your own. Because financial security isn’t just about today—it’s about making sure you and your family are prepared for tomorrow, too.