A growing number of parents are saving for their children’s educations, rather than their own retirement. This is a bad idea from all perspectives.

Underfunding Retirement

People are underfunding for retirement as it is. Because no one knows exactly how much is needed, it is difficult to predict how much one needs to save. What does retirement look like for you? At what age do you plan to retire? These two questions give you enough information to create a model either in conjunction with a website or, better still, in conjunction with financial advisors.

Diversification

By the way, I don’t advocate saving retirement money in a bank account. Save it in something that has a likelihood of appreciating in value. Money in bank accounts is safe from the risk of loss, but incredibly vulnerable to the risk that inflation will reduce its purchasing power.

In a bank, retirement savings might earn 2% to 5%. In stocks, one might earn 200%, or lose it. The Dow was down 0.5% for 2005, which isn’t too bad in light of the high cost of energy. And, my little “piggy bank” just swelled by 15% or so during 2005. That’s the power of investing in something that one is comfortable with and “letting it ride.” Of course, I could have done better. And I could have done a whole heck of a lot worse. As Jim Bobo, a judge in West Texas, used to say, “pigs get fat and hogs get slaughtered.”

Relying on Children

People may be relying on their children as a source of retirement funding. Realistically, that is going to be a very risky proposition. Children will have their own families to support, their own lives to lead, and their own priorities. Relying on children to fund one’s retirement creates yet another sandwich generation where children are pulled between needs of their parents, and their own needs.

One may have to rely on children for help in retirement. It seems to me that relying on children should be one’s final answer, not one’s opening position.

It seems to me that being forced to pay for much of one’s own education is a form of “tough love.” I speak from experience on this, by the way.

Personal Experience

I cleaned more toilets, changed more beds, waited more tables, picked tomatoes until my hands were brownish-green from the plants, and husked enough corn to feed an army to pay my way through college. From age eight until I graduated from high school, I worked my ass off! and school didn’t suffer either! Before school. After school. On weekends. During holidays. Now, it may not be popular and it certainly wasn’t a lot of fun. (There were rewards because it was a lot of fun to meet people who were different from me.)

Education was my path out. It was my escape. And it was a lot of fun. So, I threw myself into learning. Even today, I’m driven to learn new things, to expand my knowledge, to develop my understanding.

My undergraduate education was primarily paid for by the money I’d saved as a child. With every dime I spent, I thought of the work that had gone into earning that dime. There was no way that I was going to waste that money. Rather than being quiet in class, I spoke out, challenged instructors to help me understand, asked questions, and threw myself into learning. Sometimes I struggled. And, I’m grateful that I did. Life throws things at each of us, and it doesn’t always seem fair. That said, the fact that things weren’t given to me made me a better student, and a better person.

The enthusiasm that I took to learning is the same enthusiasm that I bring into the work environment. And this is good. By seeing the hard work that goes into manual labor, I have a greater appreciation for both what manual laborers do and for being out of that environment.

A picture taken in the area where I grew up by my brother, Tom.

Filed by Coleen Davis at 10:51 am under About Coleen Davis, Business Trends