Deciding where to invest first... Children or Retirement

A couple of days ago i was speaking to an old friend and we got to discussing financial plans and he asked me a simple question--- what do i save for first-- Children ( he has two of them) or Retirement?

it was an interesting question-- one i had not come across or even thought of. The answer is quite simple really--- One which you give more priority-- simple.

Usually most parents give first priority to their children and then second to themselves and rightly so since it is our responsibility and accountability to ensure that children are well catered to so that they can stand on their own feet as they grow up.

However, that does not mean that one forgets to save for their own retirement. I have seen so many cases where parents are left in the lurch post their getting old ( Baghban was a great example) and in that picture thankfully Amithabh Bacchan was a good writer!

I was told by a boss of mine a couple of years ago that life is not an OR function-- but an AND function!

So is the case with the priority-- BOTH... both are critical...  and both require your attention and one needs to find ways to ensure both are addressed.

You could do a couple of things when you have started planning...

Children's Education
There are nowdays multiple options for loans which you can avail of for higher education -- MBBS/ MBA etc-- which banks are more than happy to lend for-- and you do get a tax discount for the payback. ( not sure what will happen post the Direct tax code implementation in April 2011).
So bake this into your plan...

Bonuses and Additional income
Use some of the bonuses that are surprises to feed into one of your plans-- and ensure you invest ( read my previous blog here) when ever you get the chance.

Retirement
Worst to worst- evaluate where you may want to stay to help reduce your cost of living-- maybe in a two tier town vs the metro-- life is actually much much better in a second tier town- I am seriously evaluating that as a strategy for myself

Postpone some of the purchases
Actually Sometimes we just buy stuff because someone else has it-- and its not really something that is really required- I mean-- do we really need a big car when only two people are going to sit in it? ( read my blog on this subject here)

So in summary, we both discussed options and pros and cons and decided we just need to ensure that we plan for both simultaneously-- but with some of the help outlined above.

Planning is serious stuff-- and needs to be done regularly-- make it a part of your 3 monthly routine.