Nearly half of Americans (49%) think helping their children pay for their education is more important than saving for their own retirement, according to a survey by RBC Wealth Management-U.S.
The preference for tuition over retirement differs with the age of the respondent; Millennials (age 18 to 34) are the likeliest to choose financing education as the priority. In fact, 60% of Americans in that age group say saving for their kids’ education is more important to them, compared with 43% of Gen Xers (ages 35 to 54) and only 28% of Baby Boomers (ages 55 and older).
“These results likely also reflect both philosophical and practical differences between generations,” says Malia Haskins of the wealth strategies group at RBC Wealth Management-U.S. “For Millennials, retirement is much farther away than the more immediate challenge of putting kids through college, so it makes sense that they would put retirement on the back burner. Baby Boomers tend to believe that children should be self-motivated and should have some skin in the game when paying for college. Gen Xers, meanwhile, are somewhere in the middle. They want to pay for most if not all of college costs for their children, but they also may be nearing retirement and wanting to balance the two goals.”
While saving for retirement should be the priority, planning and setting realistic goals can make it possible for many families to meet both objectives, Haskins says. Planning is especially critical for families with lower household incomes. Americans with household incomes less than $50,000 were the most likely (57%) to place saving for a child’s education ahead of their own retirement needs, according to the survey.
“Sometimes families find they can fund their retirement and still contribute to a child’s education,” Haskins says. “By looking ahead a little bit, it’s easier to get an overall sense of whether their goals are realistic.”
“As the cost of a college education in the U.S. continues to rise, parents will naturally want to help their kids get through school without accumulating a mountain of debt,” says John Taft, chief executive of RBC Wealth Management in the U.S. But as the gap widens between American retirement balances and the amount needed to retire comfortably, he advises people to choose funding their own retirement, pointing out, “There are no grants, scholarships, or federally guaranteed loans to support them when they leave the workforce.”
Ipsos fielded the survey online on behalf of RBC from October 6 to 9, polling 2,009 Americans, of whom 569 were parents with children still living at home. RBC Wealth Management is a division of RBC Capital Markets.