Despite a general consensus in the financial advice community that saving for retirement should trump paying for a child’s college education, nearly half of Americans disagree. According to a recent poll from RBC Wealth Management-U.S. conducted by Ipsos, 49 percent of Americans place greater importance on helping their children pay for their education than they do on saving for their own retirement.
“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,” said John Taft, CEO of RBC Wealth Management in the U.S. “But with the gap between how much Americans have saved and what they will need to retire comfortably widening, we advise that people make funding their own retirement a priority. There are no grants, scholarships, or federally guaranteed loans to support them when they leave the workforce.”
Millennials (ages 18 to 34) are the most likely to prioritize financing their children’s education ahead of their own retirement. In fact, 60 percent of Americans in that age group said saving for their kids’ education was more important to them, compared with 43 percent of GenXers (ages 35 to 54) and only 28 percent of Baby Boomers (ages 55 and older).
“These results likely also reflect both philosophical and practical differences between generations,” said 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. GenXers, 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, by planning and setting realistic goals it is possible for many families to meet both objectives, Haskins says. Planning is especially critical for families with lower household incomes. According to the RBC Wealth Management survey, Americans with household incomes under $50,000 were the most likely (57 percent) to place saving for a child’s education ahead of their own retirement needs.
“Sometimes families find they can fund their retirement and still contribute to a child’s education,” Haskins said. “By looking ahead a little bit, it’s easier to get an overall sense of whether their goals are realistic.”
These are some of the findings of an Ipsos poll conducted on behalf of RBC from October 6 to October 9, 2015. For the survey, a sample of n=2009 Americans was interviewed online via Ipsos’s American online panel, of which 569 are parents with children in the household. The precision of Ipsos online surveys is measured using a Bayesian credibility interval. In this case, with a sample of this size, the results are considered accurate to within ± 4.7 percentage points percentage points, 19 times out of 20, of what they would have been had all American parents been polled.
In the United States, RBC Wealth Management operates as a division of RBC Capital Markets, LLC. Founded in 1909, RBC Capital Markets, LLC. is a member of the New York Stock Exchange, the Financial Industry Regulatory Authority, the Securities Investor Protection Corporation, and other major securities exchanges. RBC Wealth Management has $273 billion in total client assets with 1,900 financial advisors operating in 200 locations in 41 states.