Saving for Your Children’s Education and Retirement

These may be two of your largest goals. The good news is that there’s a lot of assistance out there to help you reach them. In the meantime, use these benchmarks to help finalize your important list of goals.

The College Board reported that for the 2005-2006 school year, one year of a private college costs an average of $29,026—that’s including tuition, fees, and room and board. Multiply that times four and you’re talking close to $120,000 for a four-year school—assuming your child wants to live in a dorm. A public institution costs $12,127, including tuition, fees, and room and board. That’s $48,000 to live away from home for four years. By contrast, your child can go to a two-year public college for an average of $2,191, or a little over $4,000, for the full two years. The added costs of room and board likely won’t be necessary.

As for your retirement, the rule of thumb is that you’ll need 70% of your current salary. So calculate that figure, and use it to compute your goal of retiring. Don’t feel like doing all that work? Just use the following benchmark for now. Adjust it upward or downward, based on your current salary. Say you’re making $35,000 annually. In that case, you’d want at least $24,500 annually to live on, based upon your need to retain 70% of that in your golden years. Assuming you earn an annual interest rate of just 4%, you’d need a stash of $612,500. Seem impossible? Please don’t despair. You’re apt to have a little help from, at the very least, Uncle Sam. Plus, you’re already on your way to becoming a great manager of your financial life.