Should You Tuck Away Those Extra Dollars for Education or Retirement?
A lot of families are faced with having to make the choice as to what they should plan for in regards to their savings account. Should they be focusing on being able to pay for the kid’s education? Or should they sock it all away for the retirement years?
For those that are in this situation of having to make this kind of decision they might want to consider themselves fortunate. Many families are merely living from pay cheque to pay cheque. There is definitely nothing left over to save, so they don’t have to make a decision between education or retirement.
Parents look at what education costs now, and cannot even phantom what it might be like when they have to start paying for it, as their child reaches university age. Currently in 2014 the average tuition for one year of college was $5,772. This was an increase of 3.3%. This is just one year we are talking about and for tuition only.
There are other school expenses like books, supplies and living expenses. Very few professions only demand one year of university. On the average most programs run for four years. You can expect to pay about $100,000 or more for the completed education. This is now, so if your child is not ready to attend university for another 5 years and the education costs were to continue at 3.3% from now until then, can you imagine just how much you need to save?
A few years back families were thinking of their RRSP contributions as a way to help with this. For those that did manage to invest in this program, many have had to withdraw the money to use for other purposes.
When you look at these figures you may no longer be asking which should you save for first, education or retirement. What is the use? You are not going to be able to save near the amount needed to cover the education costs anyway.
Some experts suggest that the retirement savings should be the priority. They believe that some of the educational costs can be offset with grants and student loans. Retirement savings don’t have similar opportunities. Other experts are of an opposite mind. They believe education savings should be the priority because now is the time to take advantage of the Canada Education Savings Grant. If this program is following through to its entirety if can mean a total savings of up to $7,200. towards the education bill.
Whenever it comes down to something financial and you turn to the experts to see what their opinion is you are always going to get controversy amongst them. The best you can do is listen to both opinions and take out of it what you can. See how what they are saying applies to you. Then form your own opinion and making your education or retirement savings decision based on your outlook.