Wise Wealth Builder Investing.Personal Finance.Entrepreneurship

Part 2: Saving for Both Retirement and Mid-term Plan

By Francisco J. Colayco

High school and college tuitions are important to save for. If you already know that you may have some difficulty, bring up your child to understand that he/she needs to help to be able to afford a good education. One way is to make sure that he/she can get scholarships by getting extraordinary grades. Scholarships can come not only from the school but also from foundations and well-to-do relatives and friends.

I repeat, saving for retirement is just as important if not more important than most of your other current expenses. In some cases, it could be even more important than your child’s educational expenses. This is radical but true. Some insist on spending for their child’s tuition when the child is not even taking effort to study or to excel. Until your child is ready to be responsible, maybe you are better off saving your money for your retirement.

There are ways of solving the current expenses while you are still young and have support from family and friends. Of course, I am talking to those who have some means of income. Some of you may say, you don’t even have enough money for your food and shelter. Perhaps you might think that you can just let your family worry about you when you reach your retirement age. Each opinion is different but I think that it is better to be in control of your destiny.

For example, never ever think of using the credit card for paying your children’s tuition when you know that you have no visible means of paying for your credit card bill when it comes. The credit card is the most expensive kind of debt and you could be destroying your future and your child’s future by using your credit card if you will end up with credit card debt anyway. If you are able to send your child to school for one year by borrowing but he/she has to stop in the next year, what good did that one year in school do. When your child goes back to school, there might be a stigma in losing one year or he/she might not be able to catch up because of the lay-off. You should find a permanent solution in his/her schooling even before you start borrowing.

When you child goes to high school or college and you cannot afford to complete support, your child can look for a job, no matter how menial to help himself/herself. He/she can even get a loan for the tuition provided he/she has income to pay for it. Try not to remove from your retirement fund to finance today’s expenses. When you are old and retired, nobody will give you a loan because you won’t have the income to pay back.

Of course I am talking in general terms. Each situation is different and has to be studied in the light of the environment and the people involved.

As you compute and see that you really cannot afford to give your child the education you want and also, you cannot retire even in a comfortable but not excessive lifestyle, you need to make some adjustments NOW. If you are not able to save up for retirement today, you really have the discipline to adjust your lifestyle.

Obviously your present lifestyle is too expensive for you since you cannot save. You need to cut down your expenses now. Do not think that you can save when your children are older or when you are older. Unfortunately, the older your children get, the higher your expenses become. And when you retire, you will have to spend more on health care.

• Consider sending your child to a less expensive school. Money is a family matter. Your child should understand your budget and help out in the decision in choosing a school. What is important is your ability to ensure and sustain his education and not just hope that you can find tuition money every year.
• In fact, your child should try to contribute in any way possible to save for his/her schooling. Depending on his/her age, he can take on some jobs and put the income in a fund for his/her schooling. Most important is to always get the best grades possible so that it is easier to get possible scholarships. Let him/her do research on acceptable schools, possible scholarships, do part time work or think up of creative solutions.
• If you have investments, you could consider more aggressive but reputable types of investments to give higher returns but remember that higher returns always mean higher risks. These risks however could be mitigated if your investments are long term. In any case, be sure you check that you are not entering into a scam. In a scam, you have no chance and you already lose the moment you invest your money.
• You can increase your earnings by engaging in sidelines or having all the members of your family do some work to contribute to total income. Just be sure you do not lose your main job in the process.
• When it is time to retire, you can continue working. This way, you do not have to use your retirement money until you are much older. After all, many do not want to retire because too much relaxation can dull you mind. But try not to plan on this basis. This can be a bonus when the time comes.