When not saving for college is a good idea

Gary Silverman, CFP®

At first glance, the idea of not saving for college sounds weird for a financial guy to consider. Most people would probably answer that college is good, you are good, so you should save for your kid’s college. But if you’ve been reading this column for a while, you know life’s financial decisions usually come with “it depends.” And this one’s no different.

To be clear: in most cases, skipping college savings is a bad move unless you know your child is not going to a post-secondary school that costs money. Every now and then, though, I meet a parent who tells me they’re intentionally not saving because they want their kid to qualify for more financial aid. The thinking goes something like this: If the government or a college sees you’ve got money tucked away, they’ll assume you can afford tuition and cut back on any help.

There’s a bit of truth in that—if you’ve got millions sitting around, I’d rather not see my tax dollars going toward your child’s tuition while you’re sipping cocktails in first class on your way to Aspen.

But banking on financial aid by choosing not to save is risky business. For starters, we have no idea what aid programs will look like five, ten, or fifteen years down the road. And here’s a harsh truth: a big chunk of today’s “aid” comes in the form of student loans. So, skipping savings now could mean saddling your kid with decades of debt later. That’s hardly smart planning.

Here’s some good news: not all savings work against you when it comes to aid. Accounts in a parent’s name—like 529 plans or Coverdell ESAs—are only lightly factored into the financial aid formula. It's money saved, yes, but it won’t torpedo your child’s chances of getting some help. Assets in the child’s name, though? That’s a different story—they count more heavily.

That said, there is one solid reason not to prioritize college savings: you’ve got more urgent financial needs. And no, I’m not just talking about whether there’s money left over at the end of the month (because let’s be honest—most of us will find a way to spend whatever’s sitting in our accounts).

The real question is: What matters most right now? As someone who thinks a lot about retirement, I believe your future needs—like being able to eat and keep a roof over your head once you’re no longer working—should come first. Today’s food, clothing, and shelter are essential as well. (But let’s not confuse needs with wants. Spending $100 on designer jeans? That’s a want.).

In the end, some families truly can’t afford to save for college without sacrificing necessities. That’s not selfish—that’s reality. But for many of us, college savings is one of those things we can plan for with a little forethought. It may not be easy, but it’s definitely worth our attention.

Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a retirement planning and investment management firm located in Wichita Falls. He went to college thanks to the military. You may contact him at www.PersonalMoneyPlanning.com