Peter Walsh
With women having children later in life, many parents are reaching retirement at the same time their children are starting university, making saving for both significantly more difficult than it was a generation ago, according to research by Putnam Investments.
The study, ‘College or retirement? How to balance two of life’s biggest savings goals’, found the difficulties of saving for retirement while at the same time contributing to education costs has been exacerbated by the rising cost of education.
Putnam Investments head of retail Peter Walsh said while the study originated in the US, there was clear evidence that Australians were having to deal with the same issue.
“It’s common for parents in the US to have a ‘college fund savings account’ to pay for their children’s college education, and Australian parents are increasingly offering the same secondary and tertiary education support for their children as the cost of education rises dramatically.”
According to Walsh, older parents may not be able to support their children’s education without having a detrimental effect on their own retirement lifestyle.
“More and more Australian parents plan to support their children through university, including paying for fees and covering living costs, and financial advisers are likely to get questions from their clients about putting funds aside to help with this,” he said.
The US study showed that while students are taking on more debt, parents were also doing their part, often by drawing down their home equity and retirement accounts.
“To ensure they don’t jeopardise their own future, parents must actively decide how to split their available resources and stick to a plan that meets both goals part way,” Walsh said.
