Should you save for your children's college education?
Finance expert Beth Kobliner says people struggling to save money should save for retirement before saving for their children's college education.
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College education is an important and worthwhile investment, and tuitions have been skyrocketing. In the last 30 years, the cost of a college education has risen 136 percent. And according to the CollegeBoard Advocacy & Policy Center, an estimated 17 percent of 2007-2008 bachelor degree recipients graduated with more than $35,000 in debt.
When parents are deciding whether to help their children pay for college, however, finance expert Beth Kobliner believes that parents have to think of themselves. "You can't borrow for retirement," said Kobliner, "your kid can borrow for college."
The most important thing parents can do, according to Kobliner, is put the maximum contribution into their company's 401K plans. After that, parents should max out their Roth IRA plans before contributing to their children's college funds.
Once parents get their own retirement plan in order, there are plenty of ways that parents can help their children out. State-sponsored 529 plans can be a great way to save money for colleges.
Kobliner also urges parents to pay attention to the financial aid formulas, to get the most out of scholarships. For example, some of the money in retirement accounts like 401Ks won't factor into the financial aid decisions.
In the end, having a strong retirement plan can help children, too. "If you don’t," Kobliner says, "you're going to be living with your kids when your in your 60s and 70s, so they're going to be paying for it either way."
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