It's no secret that the price of a college education has risen. According to Bloomberg, tuitions have increased 538% since 1985, and they keep climbing.
Education costs often leave those with modest means stuck between a rock and a hard place — they either skip a college degree and make substantially less in their lifetime or try to finance school with outside means, which can lead to an enormous amount of debt.
Parents, even with higher incomes, face a tough decision of their own: how to split their savings between their children's college and their own retirement. Many single parents in particular struggle with balancing these two burdens by themselves.
When forced to choose, single parents tend to save for their children's education at the expense of their own retirement, a recent Allianz study found. As an advisor to single-parent clients, it is critical to understand what drives them to make this choice and to ensure they are allocating their savings wisely. Keep reading for four ways advisors can help their single-parent clients:
1. Understand Their Background
Not just their financial background, but who they are as people. The reason why many single parents might choose to save for their child's college education can sometimes be rooted in their desire to keep their children away from long-term struggle.
"I think a lot of it comes down to what they've been through and they want to save their child from any pain of struggle from what they've faced," Sean Moore, a certified financial planner, told ThinkAdvisor. "Going from a happily married person to a single person is a big game changer — psychologically, emotionally and financially."
Moore, who has a background in retirement planning, started his own firm called Smart 4 College geared to providing financial guidance for families, especially young parents. By understanding what parents' goals are, he says, advisors can better equip themselves with the knowledge and tools to serve their needs.
Larry Moskat of RIAA Advisors tells ThinkAdvisor that funding a child's education is good for promoting the child's well-being. Moskat also has a background in clinical psychology and uses that knowledge to better serve his clients.
"It's [also] good for meeting expectations, for assuaging guilt (or even displaced anger at your own parents) from your own childhood, and it satisfies an unconscious drive to move our species forward," he says. "It's bad in that as a parent, we may suffer and interestingly, may have our own sufferings boomerang back to the very children we sought to support as we have to move in with them, enlist them as caregivers, etc."
2. If You Have to Choose, Pick Retirement Over College Savings
