Allworth advice: Should I save for retirement or my kids’ education?

Allworth Advice: Should I save for retirement or my kids’ education?

Dale in Colerain Township: I’m torn between paying for my kids’ schooling and saving for retirement. What should I do?

A: We understand your predicament. We’re both parents ourselves, so that feeling of always wanting to put your kids first is quite familiar. And given the average college graduate with loans is leaving school with about $28,950 in student debt (according to Forbes), the urge to shield your kids from such a crushing burden is probably as strong as ever.

The best-case scenario is that you save for retirement and for your kids’ college fund simultaneously. If you have a 401(k) match through work, be sure to save at least enough to get that free money. From there, it’s all about prioritizing your goals. A fiduciary financial advisor can help you work through the numbers.

But if you’re thinking of putting all or the majority of your savings towards college costs, we implore you to resist.

There are no scholarships for retirement. There are no loans. If you’re not putting enough money aside now, you’ll be out of luck once retirement arrives. And if you look at retirement as basically being ‘unemployed’ for 20 or 30 years, that’s a daunting, if not terrifying, prospect. Even scarier? You then become your kids’ problem at some point. Do you really want to spend retirement living in their basement?

If you’re dead set on helping your kids with some of the costs, have a conversation with them so they have realistic expectations. A good rule of thumb is the 80/20 split: you assist with 20 percent, then they’re responsible for the other 80 percent via scholarships, loans, or part-time work.

The Allworth Advice is that you need to put you and your future first. We know this can be a hard idea to grasp. But in this instance, it’s OK to be selfish.

Q: Mario in Cincinnati: I’m trying to rebuild my credit. Can I get a credit card to help?

A: For someone in your situation, a ‘secured’ credit card is probably the best way to start your credit rebuilding process.

Unlike an ‘unsecured’ credit card – which is just a normal credit card - a secured credit card requires a security deposit that becomes the user’s line of credit. If, for example, the user deposits $500 on the card, the user can spend up to $500. If the user doesn’t pay their bill on time, the company that issued the card takes the deposit money. Put another way, the deposit is essentially collateral. On the other hand, if the user uses their card responsibly over an extended period of time, this will improve their credit score. The user will then be on their way to qualifying for an ‘unsecured’ credit card (like most people have). Just note: secured credit cards can come with annual fees and a higher-than-average APR (annual percentage rate).

Here's the Allworth Advice: A secured credit card is a great option for someone with no credit who’s looking to build a credit history, or for someone like yourself who’s looking to rebuild their credit. Good luck!

Every week, Allworth Financial’s Amy Wagner and Steve Sprovach answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.

Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses is suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional adviser of his/her choosing, including a tax adviser and/or attorney. Retirement planning services offered through Allworth Financial, an SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Visit allworthfinancial.com or call 513-469-7500.