10 Savvy Ways to Fund Your Child’s College Savings and Your Retirement Right Now

Secure your child's future and retire with confidence using these dual-purpose savings strategies.

saving ideas for your child's education
Updated May 28, 2024
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It can be tough to balance multiple goals for your savings when you’re trying to cover retirement and college expenses.

But there are ways you can cover your retirement while still taking care of college tuition for your kids, such as using different investment options or savings plans to boost your finances.

Check out these 10 ideas to get you started so you save for yourself and your kids.

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Use a high-yield savings account

Vitalii Vodolazskyi/Adobe Piggy bank and high yield savings account

A high-yield savings account is a great place to deposit savings if you want your money to work for you. The account will likely earn a higher interest rate than if you left the money in a regular savings or checking account.

A high-yield account is also a less risky way to invest your money if you’re worried about volatility as you near retirement or college expenses.

Prioritize your company’s 401(k) match

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You may have a 401(k) through your company or organization that includes a company match for contributions.

Try to max out your company match as much as possible. After all, the match is an employee benefit, and any match received is more money in your retirement account.

But your company may have a maximum amount it will match. So make it a goal that any additional savings you get after that match can be funneled into a college account for your kids.

Save for retirement with a Roth IRA

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Withdrawing money from your Roth IRA before you reach retirement age could incur penalties from the Internal Revenue Service (IRS), but education is one of the exceptions in which you can withdraw funds without a penalty.

Check with the IRS or your accountant for specific details and potential taxes you might face when you withdraw funds. And remember that Roth IRAs have limits on how much you can contribute as well as income qualifications.

Set aside bonuses for college

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You may receive a work bonus during good years or extra monetary benefits like a pay raise. Consider investing that extra money in college tuition for your kids by placing it into a savings account, 529 college tuition account, or other investments for college.

You’ll need to stick to your pre-bonus budget with your retirement plan savings if you plan to put this extra cash away for college tuition. You should also factor in those years when your bonus is smaller or non-existent and have a plan if that will affect tuition savings.

Pay yourself first

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It can be hard to put yourself first when deciding how to save cash for your retirement and your kids’ tuition. But remember the financial rule of thumb to make sure you pay yourself first, which could leave your kids’ college tuition in the cold.

Students can take out loans they can pay back when they start working, while you won’t have the option to get a loan for expenses after you retire.

Instead, make sure you top off retirement as much as possible before assisting your kids, and consider helping them shop around for the best college loans, including private loans with low interest rates.

Use investment vehicles that aren’t for education only

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You may consider starting a 529 plan for your kids to save for college. But a 529 plan can only be used for education, or you may be penalized if you pull the money out and use it for something else.

So consider other investment vehicles like a regular brokerage account. You can earmark the money specifically for college, but you’ll also be able to use it for other things like topping off your retirement if your kids don’t need tuition money.

Make estimated budgets

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One of the most important pieces in any savings plan is not only your current budget but your estimated budget.

It’s important to sit down and figure out exactly how much you might need for college or retirement, knowing your plans could change and you’ll need to adjust your budget.

Factor in how much you think you’ll need for everyday living expenses and one-time purchases when you retire. Also, think about tuition in addition to off-campus housing, books and computers, and other items your kids will need in school.

Start saving now

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It’s essential to start saving as soon as possible, whether for retirement, college, or both. Don’t wait for the “right time.” The “right time” to save is now.

See how much you can afford to save each month and start putting that away now rather than waiting later when you have more money coming in or a better salary.

Compounding interest on your investments and savings could make your money work for you, helping you reach your college goals sooner and possibly even retire early.

Consider a financial advisor

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Saving for major expenses like retirement and college could be overwhelming when considering how much to save and where to keep it.

Don’t let the fear of not knowing where to invest prevent you from starting your investment portfolio.

Instead, consider getting a financial advisor specializing in savings, such as retirement and education. They may be able to help you navigate the process and find the right combination of retirement and education investments.

Remember other income sources

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It can be daunting to save 100% of your retirement and college needs. But don’t forget about other income sources when you create your budgets.

For potential retirees, there will be a point when you begin to collect Social Security, so consider that part of your financial portfolio, which could free up extra cash for tuition. You may even be able to earn a little extra passive income in retirement.

And research the potential your kids may have for scholarships or more affordable tuition. You may have to limit your kids to in-state schools to save extra cash on tuition, look into scholarships, or load up on general education credits at your local community college. 

The money you might save on tuition could be rolled into your retirement funds instead.

Bottom line

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It can be challenging, but there are ways to save for both retirement and college tuition. Make sure you have a plan in place and stick with it to help you save for both, even if you’re struggling financially.

Build a personalized plan that can be adjusted if your financial situation changes or you need to reprioritize your goals to help you get ahead financially.


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Author Details

Jenny Cohen

Jenny Cohen is a freelance writer who has covered a bit of everything, from finance to sports to her favorite TV shows. Her work has been featured in The Wall Street Journal, USA Today, and FoxSports.com.