Thursday, February 7, 2008

5 Tips to Save For College and Retirement

5 Tips to Save For College and Retirement
The list of hard choices and sacrifices parents make for
their children is endless. Send them to soccer camp or
little league, enroll then in private or public school,
give them a 10p.m. or midnight curfew - the list goes on
and on. One thing that shouldn't be on that list - save for
college or retirement.

It might sound harsh, but parents shouldn't sacrifice their
own financial security for the sake of their children. What
they should do is figure out how to save for their
children's college education and for their own retirement
at the same time. The sooner they figure this out, the
better.

Unfortunately, saving usually ranks lower on the list
compared to other priorities. People in their 20's may be
focused on paying off student loans and credit card debt.
People in their 30's may be focused on raising a family and
juggling the costs that come along with that, such as
buying a first home, paying two car payments, etc. When
people reach their 40's and 50's they are concerned with
saving for their children's college education and their own
retirement. And this is where the problem lies.

Getting a late start can be a challenge, but it shouldn't
stop you from being able to retire at a reasonable age and
send your children to school. Here are 5 tips you can use
at any age!

1) Think Realistically - Most people don't have a concrete
idea of how much money it takes to retire. Since the
financial needs of each person will be different, try to
imagine what you want your retirement to be like. If you
want to maintain the lifestyle you have now plus travel,
chances are you will need 100 percent of the salary you
earn in your working years to live comfortably. If you plan
to live a much simpler life in a less expensive area, it
might be possible to get by on 60% of the salary you earn
in your working years. If life expectancy is about 80 years
and you retire at 65, you have 15 years to fund. Do the
math.

2) Start Early - And if that's too late - START NOW! This
applies to college and retirement saving. The sooner you
start saving, the more interest your money will earn. Don't
wait until it's easier to save, that will never happen. If
you think it's impossible to save, trick yourself. Your
bank can set up automatic allotments to your savings
account. Start with $200 a month. You won't see the money,
so it's easier not to spend. If you feel comfortable
without $200 a month, increase the allotment to $300 and so
on. We tend to adjust to what we have. Ever wonder how
millionaires go broke?

3) Look at all the options - There are more paths available
for financing a college education than there are for
retirement. For Example: You can't get a retirement loan,
but there are many types of student loans. Scholarships and
Grants are another great source. Many students will assume
they won't qualify. Encourage your children to always
apply, because many times acceptance is based on more than
grades and income. Compare the costs of community college,
public and private universities. With loans, scholarships
and grants, sometimes the difference between the school of
choice and the school of second-choice isn't as much as you
thought.

4) Take Control - Companies are starting to drop pension
plans in favor of employee contribution plan, such as
401(k)s, primarily because they're less expensive. So
employees are left responsible for figuring out how to
invest. Don't just follow what your co-workers are doing.
Start researching, find out how to monitor the performance
of your company to bring in a consultant to give an
investment seminar.

5) Pass on responsibilities - Before and after your
children start college, it's a good idea to give them
certain financial responsibilities. Whether the
responsibility is as small as paying for groceries and
books or as big as paying rent, a car payment and insurance
- it can be extremely beneficial. There are many jobs that
allow time for school and studying. Encourage them to seek
out paid internships, part-time jobs on campus or seasonal
work during winter and summer breaks. Many times
entry-level jobs will teach your children good work ethics
and making financial decision will allow them to have more
confidence in their abilities.

It is possible to save money for college and retirement
simultaneously. The key is to set goals and start now.


----------------------------------------------------
Daniel Wansten is the Author of Cash For College, and
founder of Professional Education Services. PES is an
independent education consulting firm providing expert
financial aid advice to college-bound students and their
families. For more information and help on how to pay the
college bill go to http://www.howtoaffordcollege.com .

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