Take Care of Your Child Financially

by Joe Kita

If there’s one statistic that never fails to freak new dads out, it’s the future cost of paying for college. In fact, when there’s multiple kids involved, it usually produces more shaking than a half-price-martini happy hour.

We know. We’ve been freaked out.

Then we spoke with Robert Brokamp, co-author of The Motley Fool’s Guide to Paying for School. He told us to forget about saving for college. Like Barney, it’s something that looms large and seems real but is nearly impossible to wrap your arms around.

It’s far smarter and less stressful, he says, to focus your saving efforts on funding your own retirement. He acknowledges this sounds selfish and un-dad-like but, he explains, the harsh reality is there aren’t any Pell Grants for Pappys and the only full ride you can expect in old age is an ambulance to the hospital. So your priority should be your wellbeing. If your retirement savings swell, you can always withdraw money from a Roth or traditional IRA tax- and penalty-free to fund junior’s education. If it doesn’t then there will still be financial aid, scholarships, student loans, or perhaps a generous grandparent to cover the bills. In other words, education has a safety net but retirement doesn’t.

One other important point: Taking care of your child financially involves more than just being a good provider. It means instilling from an early age the difference between a want and a need, explaining the miracle (both positive and negative) of compounding interest, and exemplifying where money ranks in the hierarchy of life. Most dads are pretty conscientious about making sure their kids can tell good from evil but, in our rush to make them happy, we sometimes forget that money can be both and children need guidance in delineating the difference.