Retirement

How to Save for Retirement AND Spend on Your Kids

By Charles Sizemore  |  January 28, 2019

I saw a headline recently that caught my attention:

“Raising Children Increases Risk of a Retirement Shortfall”

Gee, ya think?

Why not tell me that the sky is blue while you’re at it, or that eating at McDonald’s on a daily basis is bad for my health.

Some things are so patently obvious that they don’t really need to be said. Yet Boston College’s Center for Retirement Research decided to prove empirically what we all instinctively know: Raising kids is expensive, and every dollar spent on child rearing is a dollar not available to be allocated to other things, such as your 401(k) plan.

I openly weep when I see my credit card bill every month.

It cost me more than $2,000 to send my two sons to ski school for four days earlier this month. I’m embarrassed to put into print what it cost me to take the family to Disney World. And the grocery bills… You would think I was feeding a marauding army.

It’s all worth it, of course. But meeting my retirement goals and raising my kids sometimes requires some financial gymnastics.

If you’re like me – in the prime of your career and playing the balancing act of supporting a family while also saving for retirement – I have a few suggestions, which I first shared with my Peak Income subscribers several weeks ago, to help you.

1. Pay Yourself First

I know this advice is so overused it’s almost cliché, but hear me out.

When the shekels are tight and you’re choosing between funding your retirement account or bankrolling some new request/demand from your kids (Disney trip…sigh…), it’s not selfish to choose to fund your retirement account first.

Think about it. If you’re not prepared for retirement, you’re going to end up being a financial burden to your kids decades from now. You might even have to move in with them.

That’s depressing, and no one wants that. It’s better to skip that expensive family vacation or the umpteenth round of private soccer lessons this year, top up the retirement account, and save yourself and your kids the eventual humiliation of having to move in together.

2. Don’t Be Pennywise and Pound Foolish

Financial writer David Bach made a career out of telling people to skip their daily trip to Starbucks and invest the savings in an index fund.

Well, that’s not bad advice, I guess. But how many cappuccinos would you have to skip in order to really make a difference?

Your far bigger expenses are your home and your vehicles.

So, rather than skimp on those little luxuries like the occasional trip to Starbucks, try to avoid buying more house than you need. Yes, the urge to keep up with the Joneses can be hard to suppress. But if you can save several hundred dollars per month by living in a more modest home or driving a more modest car, it will go a long way towards helping you meet other expenses.

As recently as the 1960s, it was perfectly normal for a middle-class family of six to live in a, 1,500-square-foot house. Your family of four doesn’t really need 3,500 square feet with two living rooms and vaulted ceilings.

If you’re already in a home that was probably a little too expensive for you, selling it and downsizing may or may not make sense. But at the bare minimum, resist the urge to splurge on a $50,000 kitchen remodeling. It’s rarely worth the money.

3. Quality Time With Your Kids Doesn’t Have to Be Expensive

I’m as guilty as anyone about trying to buy my kids’ affections. It’s normal. Few things are more gratifying that seeing your kids happy, and it’s so temping to just dump money on them.
But this doesn’t mean you need to constantly shower them with expensive gifts, vacation or experiences. You don’t have to take them to the Super Bowl. Simply sitting on the couch with them and watching it is good enough.

Or better, go outside and actually toss a football with them. It costs you nothing, and it will be far more rewarding for both you and the kids.

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Charles Sizemore

Income and Retirement Strategist, Charles Sizemore, CFA specializes on dividend-focused portfolios and building alternative allocations by finding value opportunities outside of the mainstream stock market.

Charles is the executive editor and portfolio manager for Dent Research's premium newsletters, Peak Income and Peak Profits.

He is also a frequent guest on CNBC, Bloomberg TV, Fox Business News and Straight Talk Money Radio, and has been quoted in Barron’s Magazine, The Wall Street Journal, and The Washington Post. He is a frequent contributor to Forbes, GuruFocus, MarketWatch and InvestorPlace.com.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar. MORE FROM AUTHOR