Parental Investing: Balancing Kids' College Savings and Your Future Needs

Parents (or any young adult for that matter) looking to establish the best financial footing for the future should consider four key savings areas: cash savings, life insurance, 401(k) & IRA, and 529 college savings accounts.

Retirement seems a long way off for people in their 20s or 30s. Likewise, young parents have a hard time imagining not being around to take care of their children. Instead, the prospect of college tuition likely looms large in parents mind as what they should be saving for to help their children. And they are right, college tuition is costly and parents who plan and start saving early will be in a much better financial position when their children are ready to attend college. However, a range of options are available to help finance education. These options are not available to finance retirement or caring for loved ones and so personal planning for the future is particularly important. Establishing a relationship with a financial planner who can provide guidance and advice about savings decisions is a prudent choice when possible.

Saving money for the future is difficult when getting by paycheck to paycheck, so individuals should consider incremental steps toward four key savings areas: cash savings, life insurance, 401(k) & IRA, and 529 & other college savings accounts.

Cash Savings

Financial experts recommend having savings of 3-6 months of living expenses in case of medical emergency, job loss, or other unforeseen financial event. Cash savings can be in a savings account, money market funds, stocks, etc.; the idea is for the money to be liquid and accessible. Before or simultaneous to building cash savings, individuals should pay down credit card and other high-interest debt as much as possible.

Life Insurance