Being proactive in saving for your child’s college fund is a good idea, especially if you’re a millennial living with the aftershocks of your student loan debts. However, you may be torn since you’re around the age where you’re also considering future retirement plans. Many struggle to find the balance, not knowing which to prioritize. While saving for two significant goals may feel overwhelming and impossible, a strategic approach can make the two a reality without sacrificing financial security.

1. Prioritize Retirement Savings First

It might seem counterintuitive, but when faced with the choice between saving for retirement and college, parents should prioritize their retirement. Unlike college, where students can rely on scholarships, grants and loans, retirement has no borrowing options.

The average American couple retiring today is projected toneed approximately $413,000 just to cover health care costs. Without sufficient savings to support you at a later age, you might find yourself depending on your children financially.

Key Steps to Secure Your Retirement Savings

Since financial security doesn’t just happen, you must plan and commit to fully prepare for the road ahead. Putting money aside is a great habit to start early. Here’s what you can do to prepare for retirement.

• Maximize employer-sponsored retirement plans: If your employer offers a 401(k) plan with a matching defined contribution, contribute at least enough to take full advantage of the match — it’s free money. This can profoundly affect how much retirement money you will have.

• Consider Roth IRAs: While primarily designed for retirement, a Roth IRA is also valuable for parents planning to save for student loans. You can withdraw contributions — but not earnings — penalty-freefor qualified education expenses, such as tuition.

• Automate savings: Set up automatic payroll deductions or transfers to ensure consistent retirement contributions over time. Automatic deposits to your savings account train your brain to work with less finances in your main account.

2. Start a College Savings Plan Early

Once your retirement savings are on track, you can shift your focus to college funding. The sooner you start, the less financial strain you’ll experience later.

How a 529 Can Help

A 529 plan is one of the best tools available for education savings due to its tax advantages and flexibility.

• Tax-free growth and withdrawals: Contributions to your 529 grow tax-free and withdrawals for qualified education expenses — tuition, fees, books and certain living costs — are not taxed.

• Loan repayment benefits: You can use up to $10,000 from a 529 plan to repay qualified student expenses.

• Beneficiary transfer: If the initial beneficiary receives scholarships or grants, the account holder can transfer the money to another student.

• Encourages contributions from others:Family and friends can contribute, making it an incredible option for birthdays or holiday gifts.

Other savings options include Coverdell Education Savings Accounts (ESAs), which allow for tax-free growth and withdrawals for education expenses but have lower contribution limits. They’recapped at $2,000 per year per beneficiary.

3. Set Realistic Savings Goals

Not all families have the financial ability to save the full cost of college expenses in advance. The family’s overall budget must be the basis for setting achievable savings goals.

The one-third rule advises that parents consider funding their child’s college tuition withone-third of their savings, one-third from loans and one-third from their current earnings. Trackingwhere the money goes through a functional budget tool is critical to helping monitor your household finances. This ensures parents are not left with a zero balance in their savings account trying to save for university expenses.

To help determine your savings budget:

• Use online college savings calculators to estimate future tuition costs and how much you should save monthly to meet your goal.

• Consider public vs. private universities and how choices impact overall cost. Tuition fees at a private university arealmost four times as expensive as state college tuition for the same four-year program.

• Discuss with your child what is financially realistic for your home situation and explore cost-saving strategies like community college transfers or work-study programs.

4. Adjust Your Investment Strategies Over Time

Long-term investing benefits both retirement and college savings. However, as the goal approaches, the level of risk should be adjusted over time.

• For retirement: Maintaining a diversified investment portfolio with higher-risk, higher-reward assets when you’re younger is recommended. This must gradually shift to more conservative investments as you near retirement age.

• For college savings: A 529 plan age-based portfolio automatically adjusts risk levels over time, shifting from aggressive investments to more stable ones as the child approaches college age.

5. Consider Alternative College Funding Options

Parents don’t have to shoulder the entire financial burden of college alone. There are numerous ways to reduce out-of-pocket costs, such as:

• Scholarships and grants: More than1.8 million private scholarship opportunities are granted to American students every year. These can cover the greater expenses of many prestigious universities and reduce the financial strain on students and their families.

• Work-study programs: Federal work-study programs allow undergraduate and graduate students to earn money for college expenses by providing part-time jobs.

• Employer tuition assistance: Some employers offer tuition reimbursement programs — encourage your child to explore these opportunities when job hunting.

• Income-based repayment plans: Federal loan repayment options can ease post-graduation financial strain for families with fluctuating incomes.

6. Avoid Common Pitfalls

Balancing the two may feel like a tightrope performance, especially with these common pitfalls that so many parents can fall into.

• Dipping into retirement funds for college: Withdrawals from a 401(k) or IRA can result in taxes, penalties and lost compounding growth.

• Overestimating loan affordability: Federal PLUS or private loans can lead to excessive debt, so be mindful of repayment obligations.

• Ignoring financial aid implications: Large assets in a child’s name can reduce eligibility for financial assistance. Instead, keep savings in a 529 plan under a parent’s name.

Secure Your Future While Supporting Theirs

It is the parents’ responsibility to see their child through life. However, with the cost of living increasing, you sometimes forget to save for retirement. Finding the right balance between retirement and college savings doesn’t come easy, but careful planning and intentional saving can help you work toward both goals effectively.