Most parents have more pressing financial needs to manage before putting money aside for education. Before you start saving for a child’s education:
Get rid of “dumb debt,” such as credit card debt or an unreasonable car loan, says certified financial planner Laura Seymour of Torchlight Advisors. Why save for future purchases if you are financing the present or still paying off the past?
Prepare for the unexpected. Most families don’t have enough money saved in a liquid account for a prolonged job loss or major home repair. Young families are notoriously underinsured, lacking adequate life insurance and disability insurance. The insurance piece is critical, said Ted Contag, a wealth adviser with Thrivent Financial for Lutherans.
Save for retirement. Take advantage of your workplace retirement plan first, saving at least enough to receive matching retirement money from your employer. That’s typically around 3 percent of your salary, not even close to what you will need for a secure retirement. The rule of thumb to save at least 10 percent of your salary toward retirement has crept skyward over the past decade. Some advisers say it should be 15 percent.