Don’t Be A Retirement Saving ‘Dropout’

Posted on March 27, 2015 at 6:47 AM PDT by

A new study points out a pretty scary statistic: Of middle-class kids who go to college, just 40% finish with a degree. If you’re a parent with young kids and saving for your own retirement, the reason why this happens matters to you.

Think about it for a minute. Ten capable high-school graduates from middle-class backgrounds enter college and just four walk out six years later.

Not even in four years, the traditional calendar for a BA. They had 50% more time (and more money spent) and still don’t finish.

retirement investing

The reasons vary. Financial problems crop up. Some realize they were never ready for the rigors of higher ed. Some cite “personal reasons” with no real explanation. Maybe they all got great jobs and moved on, but almost certainly not.

The really interesting part is how the kids who finish managed it. Being from a wealthy family helps, of course. But so does being a full-time student. A strong majority (63%) of middle-class students carrying a full load of classes got degrees on time.

There is one key thing to learn here in regard to lifelong success: Start early and commit to a goal. This relates very specifically to retirement saving and investing, too, and I’ll explain why.

You can think of motivated college students a number of ways, but the bottom line is the same. Something or someone lit a fire under them at an early age. Finishing college became a priority to them personally.

Maybe they got excited about their coursework. Maybe a fascinating job offer on the other side wouldn’t happen without a diploma.

More likely, they had strong role models at home, achieving parents who set the bar high and simply didn’t present an alternative, like dropping out or combining work and school to the point of taking 10 years to graduate.

A very similar dynamic happens with investing and retirement. Parents who are savers set an example for kids to become savers. Parents who spend wildly and go into debt do the opposite.

Saving early is a lot like getting an associate’s degree while still in high school. Yes, it’s hard to do. But you get to start off the next stage well ahead of the game. It means you are much more likely to make your goal.

Likewise, saving enough is like going to class full-time. Yes, saving adequately costs you in the here and now. But building up savings buys you freedoms later on that your peers cannot access.

Freedom to choose between jobs. Freedom to retire on time, or even early. Freedom to make interesting life choices.

Firm future

Here’s your homework assignment. If you have kids going to college some day, sit down and share with them these stats on graduation. Set a hard line on finishing on time and help them find the resources to make it work, such as living at home and summer jobs.

Then immediately link those achievements to retirement saving and investing, starting young. Show them how you are doing it and share the real numbers of your own experience. The time for these conversations is now, while you can still mold a young mind by example.

Otherwise, you find yourself later throwing thousands of dollars at yet another kid with no clear path to graduation, a job and the firm, secure future you want them to have.