Husband vs. Wife: Save for College or Retirement?


Most family decisions are made by couples around the kitchen table and when it comes to personal finance, like much else, each side tends to have a different approach. Do you ever have trouble understanding the other side?

In this column, Mr. and Mrs. Fuchs, a real married couple who has never had a fight in all their two decades of marriage (except over money), will articulate their very different approaches.

Between digs, Mr. and Mrs. Fuchs, parents of three children (an 11 year-old daughter and two boys, 7 and 5), offer a window on decisions where family, love and money intersect (and occasionally collide).

This week's round table:  He says, "We will not save for the kids' college education." She says otherwise.

Mr. Fuchs says: Honey sit down, you are going to need to.  Care for a glass of wine?  You might need that too.

Plain and simple: we will not—or, at least, I don’t think we should—save for the kids’ college education.

I know it sounds crazy and counterintuitive, but trust me: It’ll be the best thing we ever did. (Other than get married in the first place.) 

Not that I need to bolster my argument, but I spoke to Michael Kresh, a CFP from Islandia, N.Y., who said, “You can always borrow for college, but you can’t borrow for retirement.” 

See?  We should be saving for retirement.  Not one dime for the kids’ college.

A degree from a halfway decent private college now costs more than $150,000.  Who knows what we’ll be facing when we start writing checks for the class of 2024?  I’m trying to repress the whole thing. Repression, in this case, is good economics.  Say, for argument's sake, that the cost of degrees for all our little geniuses tops out at a combined $1 million. 

Just doing a back of the envelope calculation and assuming a mid to high single digit rate of return (probably too big an assumption these days) we have to save around $2,000 a month.  Worse, we’d have to start saving it when the kids are born, which was a few years ago already.

Honey, we’re doomed. Saving knowing you’ll need financial aid anyway is like furnishing your enemies with ammunition.  You are much less likely to get what you know you’ll need.  

We have a choice. Either we can save a little for college, which will hurt more than help, and a little for retirement, but not enough to help.  Or we can save adequately for retirement.

We don’t even know if the kids are going to college or what circumstances of college acceptance or costs will even be like.  There is nothing wrong with kids taking on loans to pay for their own college and there are companies like Sallie Mae (Stock Quote: SLM) for just that purpose.  Ironically, they’ll be better qualified for loans and scholarships with less money to their names.  Hopefully, discount online degrees, with discount online parties will be commonplace.  Or home college schooling.  Adds my validating CFP from Islandia: “College and retirement savings can conflict.  If your retirement is fully funded, save for college.  If not, find an alternative to pay for college and there are plenty.” 

Mrs. Fuchs says: Not saving for the children’s college?


How are a bunch of teenagers going to afford college (especially the adorable little liberal art colleges in New England)?  And if they can’t afford college...have you realized they will NEVER leave home? They are cute now but I don’t know about two grown men in their underwear playing the Wii in our living room.

Your plan is reckless. Even if the calculations work out—and I’m not so sure they do—there are more important factors to financial planning than extrapolating cost trends and dividing them by whatever it is you divide. 

Did you see that recent story in The New York Times? It quoted admissions directors, enrollment consultants and college presidents (including the president of Williams…hmmm, nice school)  about how in the current economic environment, those who can pay for college are being given preferential admissions consideration.

That’s a pretty good motivation to save. Or am I just projecting good sense onto you?

Besides, think of the message you are giving our children in not saving.

Imagine being the child whose parents decided to forsake saving for their education so they could take advantage of, say, more Disney cruise specials for seniors (Stock Quote: DIS). Don’t forget who is going to be choosing our nursing homes and interpreting our living wills. (Kids, this is all his idea!)  In terms of saving, there is sometimes something to even a gesture. 

And Sallie Mae?  I honestly can’t believe you.  If the recession taught us anything recently, isn’t it that we should not trust our children’s education to a firm that has credit trouble coming out of its ears? 

Forget counterintuitive.  Here’s a mother’s intuition.  We have no idea where college prices will go.  We won’t know what our circumstances will be in 2024.  Maybe we’ll be better off and the savings can fill the gap. Maybe we’ll be able to pay for their degrees completely. But when you are unsure, you play it safe and save.

We’ll still have time in 2024 to save for retirement—especially if we start that now too—and since when did you want to retire? Keep working. 

Now hand me that wine.  I need it. 

What do you think? Do you agree with He or with She? Add your two cents in the comments section: Is it better to save for college or retirement?

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