Our financial advisor told us not to focus on saving for our kids' college, and it's some of the best money advice we've received

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  • At seven months pregnant with my first child, I was surprised when my financial advisor told me to prioritize saving for retirement over my child's college education.
  • But she was right — you can borrow for college, but you can't borrow for retirement. Plus, I don't want to be a burden on my kids when I'm older.
  • We aren't neglecting their college funds completely, we're just not putting away the amount we'd need to to cover a four-year degree.
  • Find out what a financial planner can do for you with Personal Finance Insider's free e-book »

It may seem at odds with your parental instincts to prioritize your retirement nest egg over your child's college fund, but that's exactly what my husband and I do. 

I remember when our first financial advisor told us, "You can't borrow for retirement. Your kids can get student loans." I was seven months pregnant with my first child at the time and was slightly terrified of the responsibility that came along with a new baby, especially the financial aspect. 

Now, two kids and two college savings accounts later, we've continued to follow his advice. Here's why, and how it affected our retirement nest egg. 

Retirement is expensive — and you can't borrow for it

It's estimated that the average retiree needs a $1 million nest egg to retire comfortably. This includes costs of healthcare, everyday expenses, travel, and any inheritance you'd like to pass on. This number can be a bit mind-boggling, especially to two young, soon-to-be-parents just starting out in their careers. 

When our financial advisor walked us through what we'd need to save each month in order to reach our retirement goals, we were shocked to learn that we could actually afford the $500 contribution to my husband's 401(k) (which was matched at 75% by his employer), plus the $500 per month contribution to my IRA. 

What we couldn't afford? Contributing another $1,000 to fully fund our son's 529 college savings plan to cover the cost of a four-year college.

Student loans aren't the end of the world

Sixty-nine percent of 2019 college graduates left school with student loans, leaving school with an average of nearly $30,000 in debt. Sure, no one wants to saddle their kid with debt the moment they walk across that stage, but having a bit of student debt isn't the end of the world, either. 

If your kid opts for federal student loans, they'll have the added perks of lower interest rates, income-based repayment plans, and perhaps even student loan forgiveness. Plus, I'd much rather my kids have a manageable amount of student debt than be a financial burden to them in my retirement.

There are other ways to pay for college

We won't always have to choose between our retirement savings and our kids' college education. We hope to one day be in a financial position that we can help pay for expenses like books, tuition, perhaps even room and board out of our cash flow. 

Plus, if we really hit our retirement savings hard and have too much money when our kids are in college (hey, a girl can dream!), we can always reallocate some of our retirement funds to pay for their college, though we may have to pay a penalty if we take this approach. 

College students have other ways of funding their education, from work-study jobs to living off campus, even taking on a part-time job while in school. That's not to mention the scholarships and grants they might qualify for. There are no scholarship programs for retirement, and you can't borrow for it either.

Saving for retirement is better for your taxes

Anyone actively saving for retirement is probably familiar with the tax benefits of retirement savings plans. From reducing your taxable income with a 401(k) to tax-deferred or tax-free growth with an IRA, the benefits are plentiful.

While affording some tax benefits, saving for college in a savings plan like a 529 doesn't quite provide the same impact. 

We're not neglecting it altogether

We're still saving for our kids' college, just significantly less than what we're allocating to our retirement. We contribute around 50% of what we set aside for our retirement to our kids' college funds. 

We also have two separate 529 plans. These college savings plans offer some great benefits, from tax-free growth to no tax penalty if you use the money to pay for college and custodial control of the account. 

Sure, we're aware of the 10% penalty should a child not attend college and you want to use the funds for something else. But in the last 20 years, the percentage of students who get a bachelor's degree increased from 29 to 39%, and it's likely that number will only increase once our kids are college age. 

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