Career & Finance

How to Balance Saving for Your Child’s Future with Saving for Your Own

When a friend of mine graduated from college and was starting her new job, she looked to her dad for retirement plan advice. When she asked him what his retirement plan was, he replied, “you are my retirement plan.”

She was, understandably, surprised.

Now that she has two kids of her own, she understands the tradeoffs her parents had to make when she was growing up. Though they had jobs that paid well, they also had three kids. Her parents paid for summer camp, dance lessons, and education for their children. At the end of the day, there just wasn’t enough to save for retirement as well.

Unfortunately, this isn’t an uncommon story — 34 percent of people over 55 don’t have anything saved for retirement.

So how do you not become that scary statistic when you have kids? How do you balance saving for their future as well as your own?

There’s no easy answer, but there are a few things that can keep you on a good path:


Keep spending in check early-on

If you’re expecting a baby or you’ve just welcomed your new little bundle of joy, this tip is for you. According to NerdWallet, 36 percent of new parents think they’ll spend $5,000 raising a baby in the first year. In reality, they estimate that could balloon to over $51,000.

$51,000? I was skeptical too.

As an experiment, I decided to track exactly how much we spent on our new little bundle of joy the first 12 months of his life (yes, I’m that weird person who finds this fascinating). We were pretty careful with most of our purchases, but I was shocked when I added everything up and found that we spent over $24,000 in 12 months.

Over-spending on your newborn isn’t going to put you on a path to financial ruin — and let’s be honest, buying cute little outfits or fun little toys is can be a fun part of being a new parent. But being mindful of where your money is going early-on can help you create good habits. It’s easier to start with good spending habits now than change bad spending habits down the road.


Consider delaying big purchases

First comes love, then comes marriage, then comes a baby, a bigger home, and a minivan.

As kids come into the picture you may need more space and a bigger car. That tends to be the natural progression, but you might not need it as quickly as you think.

Laying out cash for a new home and an upgraded car while also paying for new baby expenses can send saving for your future straight to the back-burner. Delaying a move into a bigger home or sticking with your hatchback for a year or two more can help you strike a financial balance.


Run the numbers (really)

Before our son Henry was born, our retirement strategy was to “save a reasonable amount.” It worked for us.

But when we started thinking about adding college into the mix and projecting what would happen if we ended up with two kids and two college savings accounts, and eventually a bigger home, we realized it was time to get into the numbers. And, I kind of dreaded it (yes, I work in personal finance and even I dreaded it, so it’s OK if you do too).

We needed to figure out:

  • How much do we actually need to save to be able to retire and live a comfortable life
  • How much we would need to save to send a child to college (we priced out both private and public options)

With real numbers, you can actually look at tradeoffs. If we want to send Henry to private school, our projected retirement age got pushed way out. But we calculated that saving for an in-state public school could work with our goal to retire at an appropriate age.

Whether you decide to save for your child’s college education or not is a personal decision, but making the decision based on real numbers can help you see what is realistic and what isn’t.


Prioritize retirement

If you’re tempted to let your retirement savings slide for just a year or two, remember this: there are no grants, scholarships, or loans for retirement. If you have to choose between saving for your child to attend college or saving for retirement, most advice will tell you to choose retirement.

If you struggle with that, think of it this way: you don’t want to have to tell your adult child that they are your retirement plan. Even if you can only set aside a bit of money, take care of your future self first.