Should Parents Save for Their Childs College Fund or Retirement - Essay Example

?Should Parents Save for Their Child's College Fund or Retirement? The financial hardships of the past Wall Street meltdowns have had a tremendously adverse effect upon the income of people who rely on their investments for their retirement and in cases of people with children, the college fund of their children. The liquidity that parents expected to have well into their retirement years does not exist these days so that people have found themselves making financial sacrifices for their children once they hit college. But doing so now challenges their ability to care for themselves during their retired lifetime. That is why there are now two schools of thought when it comes to a child's college education. Either a parent pays for the child's education or they don't. Not paying for a child's education may sound unreasonable to most parents but because of economic uncertainties relating to the advancing ages of the parents, there are actually solid arguments to support the latter school of thought. Susan Adams, columnist for Forbes magazine explains that; .... it turns out that students whose educational costs are paid for entirely by their parents, engage in more leisure activities. In other words, they party instead of study. Most students don’t party so hard that they flunk out of college, but they do damage to their academic performance(Adams, Susan “Want Your Kids to Succeed? Don't Pay for Their Education”). The hard earned and saved money that the parents pour into their child's education goes unappreciated and ill spent because the children choose to take it easy in college since their parents pick up the tab even for a change in college majors. It is perhaps because of the ease of life that the students have in college due to their parents shouldering the bill that has led to the current generation of lackluster college graduates. In fact, Elizabeth Armstrong, a sociology professor at the University of Michigan observed that parents had a tendency to cut back on their personal savings in order to make room for their college bound or resident children. She claimed that ; “I noticed there were a lot of parents who had to scrimp and save and pull money from all sorts of sources, and they were not getting the results they expected “ (qtd. in Adams). As future retirees, parents must remember that no retiree will get a retirement loan. It is up to you as a parent to find the right balance between the educational needs of your children and your own retirement needs. Consider the following: “ The choice to pay for a child’s education is certainly a personal one, but most financial experts agree on one point: parents should not sacrifice their retirement funding in order to pay for their kids’ educations. “ (Mayfield, Julie & Mayfield, Lindsey “Should Parents Pay for College?”). Future retirees have a tendency to save in bulk for both their retirement and the college fund of their kids. Some parents argue that because the IRA and 401 (k) allow for advance withdrawals for their children's college needs, then there is no reason that they cannot help out with tuition and other college expenses. It is after all, a penalty free withdrawal against their investments But, will still be subject to tax agreements. As a parent and future retiree it is important to keep in mind that; You are using up your retirement savings. Once the money has been withdrawn from the IRA, you can't put it back. The only way to increase your IRA balance is through the normal contributions, which are subject to the annual limits. (“Retirement Plans and Saving for College”). One of the basic reasons that parents find themselves wanting to remain involved in their children's tertiary education, even though there are methods by which a student can actually pay for his own school fees independently, is that a ... parents’ sense of efficacy for helping their children succeed in school focuses on the extent to which parents believe that through their involvement they can exert positive influence on their children’s educational outcomes (Hoover- Dempsey, Katherine & Sandler, Howard “Why Do Parents Become Involved in Their Child's Education?”) Part of that falls under their sense of responsibility for ensuring that the child matriculates from a school of the highest quality, with that sense of quality coming from the amount of money spent to enroll the child in the school. That is why parents begin saving for the college fund at the time of the child's conception. However, the parental sense of financial responsibility should never come at the cost of their own retirement future. If a parent is willing to pay for the child's college education, then that parent must consider the following before deciding that involving themselves financially in the act will not affect their retirement fund. The fact of the matter is that: A parents willingness to pay for the child's education is shaped by their total income and number of children who must share that income; parental involvement in higher education is increased when the parents themselves received parental support, which suggests a continuity over generations. (Steelman, Lala Car & Powell, Brian “Sponsoring the Next Generation: Parental Willingness to Pay for Higher Education”) It is important to remember that unlike college students who have the ability to acquire student loans, scholarships, and work jobs in order to help pay for their education, retirees do not have any other source of income other than the savings that they built over their working lifetime. Let us remember that nothing that is gotten easy is worth the trouble. Which is why studies have strongly suggested that students who get free tuition in college choose slacker courses and barely graduate. While those who have to actually work to earn their degree end up in serious careers with a brighter future. This country was built on the back of founders who worked for their future and never had it easy in their lives. That is what made this country great and that is also what will earn us a generation of admirable, hard working graduates in the future. Those are the reasons why parents should not save for their child's college fund. Rather, they should save for that rainy day when they are no longer working and in need of cash for their daily and health care needs. The children can very well take care of themselves using the various student education resources available to them. Works Cited Adams, Susan. “Want Your Kids to Succeed? Don't Pay for Their Education.” Leadership. forbes.com. 16 Jan. 2013. Web. 4 Nov. 2103. Hoover-Dempsey, Kathleen V. & Sandler, Howard M. “Why do parents Become Involved in Their Child's Education?”. Review of Educational Research Vol. 67 (1997): 3-42. Print. Mayfield, Julie & Mayfield, Lindsey. “Should Parent's Pay for College?”. Education. usnews.com. 19 Jun. 2012. Web. 5 Nov. 2013. “Retirement Plans and Saving for College”. FinAid. finaid.org. n.d. Web. 5 Nov. 2013. Steelman, Lala Carr & Powell, Brian. “Sponsoring the Next Generation: Parental Willingness to Pay for Higher Education”. American Journal of Sociology Vol. 96 (1991): 1505-1529. Print. Weston, Liz. “Why Parent's Shouldn't Pay for College”. Parenting Guide. msn.money. 14 Aug. 2013. Web. 3 Nov. 2013. Read More