by James K. Sheek IV

If you have money to save, is it better to save for retirement or for your child’s education?

As parents, if we consider this question independently, apart from any other financial concerns or plans, it would seem that saving for our retirement would take precedence over saving for our children’s education because there are many more alternatives to fund educational expenses than to fund retirement. For example, as long as we are still working, we may use current income to fund college expenses. Also, there are several types of loans, financial aid and scholarship opportunities, and of course, our children can work to help pay their own way through college. Our children may even need to consider less expensive schools or consider certain military options to pay for school. And perhaps even some financially secure grandparents can contribute.

On the other hand, we as parents are responsible for our own retirement planning and do not have quite as many options as our children. The most important thing for us to consider is to start saving as early as possible. However, I believe that we will rarely be faced with such a cut and dried question as this when we plan for the financial future of our families. To me, the panorama of complex financial issues that we face for ourselves and for our children highlights the importance of a comprehensive and integrated financial and estate planning process along the way.

One of my favorite authors in the financial services arena, Ron Blue in his book Master Your Money, describes financial planning simply as “allocating limited financial resources among unlimited alternatives.” To answer the long-term question, is it better to save for retirement or for our children’s education, presupposes that we have taken care of short-term needs such as debt repayment, payment of taxes, general living expenses, charitable giving and determining our true cash-flow margin. Once we take care of such immediate short-term needs, then we can determine how much we can save from our cash-flow margin for our own long-term goals such as financial independence, children’s education and major lifestyle desires. After all, as fundamental as it sounds, “if you make a decision to use financial resources in any one area, by definition, you have chosen not to use those same resources in the other areas.”

Recently while we waited for our food in a fast food drive-through lane, we realized that we did not have enough cash to pay for the food. From the back of the car, one of our children hollered, “Just charge it, Mommy.” That one comment made us stop and begin to question not only how we were spending our money, but also what we were teaching our children. How we handled our own personal financial matters then became a much larger and more important matter than whether we saved for retirement or college.

Our thought process regarding financial matters changed from the short term to the long term. Comprehensive and integrated financial planning is critical to this process. Blue asserts that “the longer term perspective you have, the better the possibility of making a good financial decision now.” As parents, if we enter this financial planning process and try to spend less than we earn, thereby giving us a greater opportunity to save for the future and take advantage of investment compounding, who knows, maybe we can then save for retirement and help send our kids to school.

Kim Sheek earned a law degree from the Cumberland School of Law and is a member of the Georgia and Alabama State Bars. He currently serves as an investment executive with Stifel, Nicolaus & Company, focusing on investments, estate and financial planning.