College Savings or Retirement Savings – Which Should I Save For First?

There is a deep, deep instinct within parents to care for their children. Every parent I’ve ever known wants their children to have it better than they did.

Often this means Mom and Dad sacrifice for their children.  These sacrifices can be small such as not ordering dessert when eating out or driving the old beat up (paid off) car one more year before buying something manufactured in the last 5 years.

Other times the sacrifices made by parents can be financially devastating.

The desire to provide for children is so strong that choices are made that can make things worse than they need to be.

The classic question of saving for your children’s college funds or for your retirement falls right in line with this idea.  Is it a terrible idea to set aside your retirement needs to save some extra dollars for the college fund?  Or can you justify putting off retirement savings to make sure there is enough money to pay the college bills?

Deciding Whether to Save for College or Retirement

Here are 6 factors to consider when making the decision of whether to save for college education costs or your retirement.

1. Why Not Do Both?

Ideally you have enough extra cash left at the end of every month to be able to set aside money both for retirement and your children’s education.  That is the best of both worlds as long as you are saving enough to meet each goal.

The problem comes in when there isn’t enough cash left to do both adequately.  You could underfund each goal, or make the choice to focus on just one.

2. Order of Importance

You must decide what is more important to you: financing your children’s education or being able to afford to retire.

It is natural to put your kids’ needs before your own.  That instinct kicks in, as it should, but it can cloud your judgment.  If you take a step back to look at the overall picture, you should see some factors that make the decision easier:

  • Risks of lack of funding for goals
  • Availability of loans
  • Earning power

3. Risks of Not Having Enough Money for College and Retirement

Stack of MoneyYou need to consider what the risks are of ending up with insufficient funds for each goal.  Are there any alternatives available?

With college costs there are several alternatives: scholarships, not going to college, going to a less expensive college, going to community college for the first 2 years before transferring, or student loans.

With retirement there are significantly fewer alternatives: continuing to work into your old age, receiving government assistance, or relying on family to care for your financial needs.

4. Availability of Loans

One of the most common phrases used during the college-or-retirement discussion is: “You can get loans for college, not for retirement.”

Simple, but true.

Your child can choose to get student loans to go to the college of their choice.  They can finance their education on their own and pay back the student loans in the future.

The same is not true for retirement.  There are no special government-backed loans for seniors that want to retire but cannot afford to.

Plus, you can always help pay off your child’s loans in the future if you have the financial ability to do so.

5. Earning Power to Overcome Short-Term Financial Obstacles

You must consider the earning power of the two parties involved in this decision.  If you are 45 and your child is 18 they have a much longer period of time ahead of them to earn an income to pay for their financial needs.  Those needs include their own retirement and paying off their debts.  You have 20 years to age 65 while the child has 47 years.

6. Becoming a Burden

A well-funded retirement doesn’t just benefit the retiree.  The perks stretch out to their family members, too.

No, you don’t have to let the kids stay at your vacation home at the beach.  The true benefit is not giving your children (and their families) the worst gift of all: the need to care for your every financial need.

Just like you have an instinct to do what is best for your kids, they don’t want to see Mom and Dad unable to afford anything in retirement.  No good child is going to see their parents off to the poor house, so they dip into their own income to pay for your needs.  This in turn can cause them to face a similar dilemma to your own: should they fund their own retirement, pay for your financial needs, or fund their own children’s education?  (The affectionate term for this is the “sandwich generation” because they are sandwiched between providing for the needs of their parents and their children at the same time.)

Final Thoughts on Choosing Between College Savings and Retirement

Your parenting instincts will usually lead you down the right path.  Usually.

When it comes to choosing between college savings and retirement you should pick taking care of your retirement needs first.  There are too many available alternatives for college savings to justify endangering your own retirement and potentially becoming a burden to your kids when they are older.

Take care of retirement first and work to find ways to still save money for college.

Would you pick retirement savings or college savings first?

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Published or updated June 25, 2013.


  1. I think there is some merit to having your kids pay for at least part of their education. I would ensure that my own financial stability in retirement is there before saving for my kid’s education. Assuming that is on the right track I’d start saving for college.

    • Glen Craig says:

      It’s a funny thing but when your money is on the line you seem to care about it more and I think that holds true with college education.

      I think a lot of parents think it’s selfish to put money in retirement before college savings but it really isn’t.

  2. My 2 cents – At the end of the day there are numerous options for your children to attend college (grants, scholarships, loans, community college, state school) while there are very few ways for you to fund your retirement if you haven’t saved properly.


  3. I definitely plan to have my kids pay for some amount of college, so retirement likely would take precedence. That said, if I didn’t have the means to avoid student loans, that would factor into my decision. I would end up losing a lot of money in interest paying student loans as compared to having it all in retirement.

  4. Jr. College tuition in most states is around $30/credit hour. That is = to $1,800 for tuition for the first 60 hours of college (basic studies like Math, English, Science and History). These courses are required for any degree at a 4 year university. At a state school in Texas these courses are around $350/credit hour, or $21,000 in tuition. Even more at a private university! It’s clear that there are cheaper ways to pay for college including scholarships and grants. If you can get an early start on your retirement and want to help with college, then you can try to cash flow school as long as your kids choose an inexpensive state school for their degree and go to a Jr. College for their basic studies. It’s entirely possible to get a quality education without student loans or mooching off of your parents. It’s not possible to retire with dignity if you don’t plan for it.

    • Glen Craig says:

      True. And you can start the college savings earlier if you can get your kids taking advanced placement tests for courses that would get college credit while still in high school. The money part isn’t the only part that has to start early.

  5. Both should be a priority.
    It doesn’t have to be either or.
    If most adults could learn to save early – 20s vs 50s- their retirement and the college fund could benefit. It is so sad that many parents take so long “to get it together” that their children suffer. It is very possible to live a comfortable life with a properly funded retirement account, plus an emergency fund, plus a college fund.
    However, it does “require work, sacrifice and living within ones means.” Unfortunately for many college age children, too many parents are not familiar with these ideas.
    What is Enough??
    Is the bigger house, the brand new SUV, the designer handbag/watch, the diamonds, or the daily restaurant meals worth more than a child’s college education??? I don’t think so- but that’s just me.

  6. I agree with what you’ve written. We max all retirement vehicles, put $2k/month into taxable investments, and contribute $1k/month to a 529. The 529 is now very large, nearing $200k, so we are thinking of funding a Roth IRA as our kid works during high school summers. (He’s in Jr. high, now.) We should then be able to avoid having to pay penalties on leftover 529 earnings. Then again, he wants to go to Stanford, so we may not have that problem. 🙂

What Do You Think?