When it comes to college, many parents feel torn between supporting their child’s dreams and protecting their own financial future. It’s natural to want to help your child succeed, but when it comes to paying for higher education, there’s an important truth that often gets overlooked: students can borrow for college—parents cannot borrow for retirement.
No bank, lender, or financial institution is going to loan you money so you can retire comfortably. That means every dollar you take away from your retirement savings to cover tuition or student loans is a dollar you’ll never get back—and more importantly, you’ll lose the power of compound interest. Since retirement is often decades away, those lost contributions can cost far more than the tuition bill in the long run.
Parents Want to Help—But at What Cost?
Studies show that 86% of parents want to at least help pay for their child’s college education, if not cover it entirely.That’s admirable, and it comes from a place of love. But it should only be done if parents can truly afford it—without jeopardizing their own financial security. Otherwise, the short-term generosity can create long-term financial strain.
The good news is that if you start saving early, you don’t have to save nearly as much. Compound interest can do much of the heavy lifting over time. Every dollar you set aside when your child is young has the potential to grow exponentially by the time college rolls around. Waiting too long, however, makes the savings burden much heavier.
Example:
- If you start saving $200/month when your child is 5 years old, and your investments grow at 7% annually, you’ll have about $77,000 by the time they turn 18.
- If you wait until your child is 15 years old to start saving, you’d need to put away nearly $1,900/month to reach the same amount by age 18.
That’s the power of time and compounding—starting earlier means you save less but end up with more.
Why Parents Should Think Twice About Co-Signing
One of the most common ways parents step in is by co-signing private student loans. While this can help a student qualify for lower interest rates, it also makes the parent legally responsible for the debt. If your child struggles to make payments or defaults, you’ll be on the hook. That’s not just a financial setback—it could derail your retirement plans entirely.
Students Have Options
The good news? Students have multiple ways to reduce their college costs before turning to private loans:
- Applying for scholarships and grants (free money that doesn’t need to be repaid).
- Attending community college first to save on tuition.
- Working part-time to help cover living expenses.
- Choosing in-state public schools over pricier private or out-of-state universities.
- Borrowing federal student loans with lower interest rates and flexible repayment options.
These options may not cover everything, but they help students take ownership of their education without jeopardizing their parents’ future.
Putting Yourself First Isn’t Selfish
It may feel backwards to prioritize retirement when college comes first chronologically, but financially, the opposite is true. Experts consistently recommend that parents focus on their retirement savings before contributing heavily to college costs. You can’t recapture lost years of compounding growth in your retirement accounts—but your child can always borrow, work, or choose a more affordable school.
The Power of Boundaries
Saying “no” to co-signing or draining your savings may feel difficult in the moment, but setting financial boundaries can actually help your child. It encourages independence, responsible decision-making, and a deeper appreciation for the value of money. In the long run, they’ll not only get an education but also important life lessons in financial responsibility.
Bottom line: Your child has a lifetime of earning potential ahead of them. You don’t. Protect your retirement first. By doing so, you’re not just securing your own future—you’re ensuring you won’t become a financial burden on your child later. And that may be the greatest gift of all.
Want to keep learning? Join us at our next Money, Mommy & Me workshop where we cover practical tips on saving, student loans, and how to start talking to your kids about money.
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