Why I'm Investing in My Son's College Fund Before My IRA

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There was a great article on DailyFinance in August showing why one couple isn't making their children's education their top priority. They are focused on funding their retirement first. While the math shows it is better to make sure you have your retirement accounts before funding college expenses, I think it is wrong on a different level.

As a parent, my first job is to teach my kids how to be successful in this world. It is my responsibility to give them the right tools and education to help them compete thrive, and become contributing members of society. I'm fully aware of the power of compound growth and how it can derail your retirement planning. I'm also aware my child has more "earning" years than I, so it would be in my best interest to take care of my retirement first. While I understand all of these facts, I'm making a bigger investment in my child. Here's why I'm ditching the traditional retirement advice and investing in my child.

What is a Parent's Job?

When we become parents, we become responsible for our children in every aspect until they can leave the home and be on their own. When you first think about having children, you have to start planning. My planning consisted of starting a 529 college savings account as soon as my son was born. I have a desire for my son to succeed in life. No matter how bad you feel the college expenses are or will be, it is hard to fight the consensus that a college degree is still necessary.

Yes, your child might have a fancy degree and only works part time. There is nothing I can do about that. What we don't know is where college and associated expenses will be in 16 years. I can't know what will happen so far ahead, but I can certainly plan for it. By helping my son get a college education, I give him the foundation for success. The rest will be taught as he grows up and learns how to earn his way through life. I feel this is a parent's No. 1 priority.

Education is Still Very Important

There are jobs that don't require a college education. No one can deny that. But with many other jobs, you don't even get a chance for an interview unless you have a college degree. When you go into a pool of applicants, you have to bring your A-game. If you don't have a degree, then you are just that far behind those who do. I have spoken with numerous companies and recruiters who provide grim chances for those without degrees.

College costs are out of control in this country. Student loan debt tops $1 trillion and is rising. Still, we have a business culture that emphasizes a piece of paper. Until that emphasis goes away, college and the accompanying degree are utterly important. In the latest Pew Research report, millennials with a college degree are earning $17,500 more on average per year than someone who has a high school diploma. In the same study, it shows college degree holders have a 3.8 percent unemployment rate -- while those with a high school education face 12.2 precent. These numbers alone show a college education is still important.

There is No Free Lunch

My parents gave me the gift of a free education. They worked hard to provide for our family and even took on the debt. They did this to give me a leg up on others who had to get student loans. By giving me the opportunity to go to college without getting a loan in my name, my parents enabled me to hit the ground running with no restrictions. It is much harder for a new graduate when he or she is starting in a massive debt hole.

While my parents afforded me this excellent opportunity, I never took it for granted. I worked ever since I was legally able. I worked while in college and made money to pay for stuff I needed or wanted. I had to keep my grades up to keep my education funded, and my parents expected certain things from me. If I didn't deliver, I would have to answer to them. This method showed me there was no such thing as a free lunch. My son will learn the same.

I have a plan to help my son pay for college. I'm slowly funding his 529 account, which will give him a nice chunk of his education funded by the time he goes to college. The key to my plan is I won't tell him about his savings account. Why? I don't want him to think he can goof off and do what he wants. He will be required to work in high school. He will be required to keep his grades up. He will also be required to save up money for college. We will be rewarding him just like a rewards credit card, but in reverse. When he saves a dollar for college, we will provide two. This is what the college fund will be for.

My Son is My Investment

While not a traditional idea for an investment, I feel my college education fund is an investment in my son. I invest most of my time and money in him while he grows, so why not see that through to fruition by helping him fund his education? I know the power of a good education, but I also know the power of learning how to meet and exceed goals.

Yes, I could be affecting my retirement savings, but the 529 account I'm funding has some quality index funds from Vanguard, which provide me with some serious compound growth. I will lose out on 16 years of full investments in my retirement, but I feel it's more important for me to funnel most of the money toward my son. He is my greatest investment, and my goal is to show him how to properly succeed in life. I'm investing in the tools for him to use throughout the rest of his life.

%VIRTUAL-pullquote- I choose to invest in human capital at this point in my life.%While I consider my son a massive investment along with his higher education, I will not neglect my retirement in full. Instead of just quitting on my financial security, I'll just delay it for some time. I created a debt payoff/savings plan some time ago when facing a mountain of debt. The system worked well for me, so I plan on implementing it with my son's college investment. In the beginning, I'll funnel 80 percent of my extra funds into my son's 529 account. The other 20 percent will be placed into my Roth individual retirement account. I already fully fund my 401(k), so not fully funding my Roth IRA is OK. As the years go by, I will slowly reduce his contributions and increase mine. I also have an individual investment account, which enables me to increase my passive income.

All will not be lost when my retirement accounts are not funded to their fullest extent. I am a huge advocate for earning more on the side, so when I figure out ways to make a little extra money, I will do it. Any extra money coming into my budget will be allocated appropriately for my retirement. My main focus will be solely on providing my son with the necessary tools to approach this life with an open mind. Funding his education over my retirement is more important to me than the traditional advice. I choose to invest in human capital at this point in my life.

Grayson Bell is the founder of Debt Roundup, a personal finance site dedicated to helping people fight debt and grow wealth. He is also an avid home brewer, is a car junkie and loves all things DIY. He also shares his thoughts on how to make money at Sprout Wealth.

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Why I'm Investing in My Son's College Fund Before My IRA
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