Should I save money or pay down debt? Should I pay for my child’s education or save for retirement? Should I pay down my student loans or build my savings? These are valid questions, as many of us have multiple savings and debt repayment goals to achieve at the same time. Figuring out how to prioritize them can be a struggle.
The good news is that in most cases, the answer to these questions is the same: DO BOTH. A recent Boston Globe Article discussed savings strategies for every age and touched on situations where multiple goals commonly arise including:
Paying Down Student Debt vs. Saving for Retirement
Young and first-time workers may want to pay down their student debt as fast as possible. And paying down debt is a good thing. But, if these workers are not also saving for retirement, they are missing out on some of the most important years to save.
Because of the miracle of compound interest, money saved for retirement in your 20’s grows more than money saved later. Contribute at least enough money to get a company match while you continue to pay at least the minimum payment on student loans.
Buying a House vs. Saving for Retirement
Workers in their 30’s and 40’s may be tempted to cash out their retirement saving accounts to buy their first home.
But this could be detrimental to their retirement savings. Don’t touch your retirement savings to buy a home. Instead save a portion of your pay in addition to saving for retirement.
Saving for Your Childs College vs. Saving for Retirement
Parents want to provide the best for their children. Saving money for your child’s education will help them avoid taking out large loans they will need to pay back later. But don’t forgo retirement saving and only save for education. Research lower-cost schools, find free money for schools, and continue to save for retirement. Remember, you can apply for grants and scholarships -
– or take out student loans, if your savings doesn’t quite cover the costs - but these options are not available for retirement.
Get Started During National Save for Retirement Week, October 19-25, 2014
National Save for Retirement Week is an opportunity for employers to make employees aware of how critical it is to save now for their financial future, promote the benefits of saving for retirement, and encourage employees to take full advantage of their employer-sponsored plans by starting or increasing their contributions. Learn more at Save for Retirement Week
Katie Bryan works for America Saves, managed by the nonprofit Consumer Federation of America (CFA), which seeks to motivate, encourage, and support low- to moderate-income households to save money, reduce debt, and build wealth. Learn more at americasaves.org
America Saves Resources
- Save for Retirement
- Saving at work through a 401k plan
- Saving outside of work through an Individual Retirement Account (IRA)
- America Saves Blog
Other Resources
- Ballpark E$timate, Choose to Save
- Retirement Personality Profiler, Choose to Save
- Smart 401(k) Investing, Financial Industry Regulatory Authority (FINRA)
- Mymoney.gov, Planning for Retirement, Federal Financial Literacy and Education Commission
- Top 10 Ways to Prepare for Retirment, US Department of Labor
- 29 charts to explain Americans' financial lives, Vox Media
The Personal Investment Enterprise Program, a partnership between Foothills United Way and Boulder County Community Action Programs, provides tools that empower low-income individuals and families to save and build assets to strengthen their economic stability. To learn more about the program visit www.bouldercountypie.org. The first step in applying to the program is to attend an orientation meeting with Nino Gallo at Community Action Programs at Boulder County. Nino may be reached at 303-441-3998 or at [email protected]
