Family financial advice for a world in which being selfish is always the right answer.

Sometimes it seems as if there are only 10 or so different topics in the financial advice columns in the news media, and columnist after columnist keeps recycling variations of each.  This small set of topics includes, for example, investing for retirement, social security strategies, diversification of assets, investing to avoid or reduce taxes, and maximizing the value of a retirement plan.

One of my favorites of these old chestnuts is the column that helps families decide whether to save for retirement or for the college education of the children.  Here are some examples of different versions of this column over the past few years:

• “Should Parents Save for Kids’ College or Their Retirement,” The Christian Science Monitor, April 21, 2010
• “Parent’s Choice: Save for College or Retirement?” Forbes, March 16, 2010
• “Should You Save for College or Retirement,” US News and World Report, May 18, 2009
• “Saving for College Vs. Retirement,” Kiplinger, September 10, 2008
• “Your Money; Today’s Lesson: Rethink College Funds,” New York Times, September 24, 2005

In every case the advice is the same: when you have to make a choice between saving for your kids’ college or your retirement, always pick retirement.  The rationale of all the articles is the same: that the children can fend for themselves and have their entire lives to repay loans, whereas the retirement of the parents is just a few years off and they won’t have time to build or rebuild their retirement accounts.

The premise of the question is that a family has spent profligately instead of saving for both college and retirement, although the articles on the topic since the economic meltdown will sometimes blame the stock market crash for putting a family in the dilemma of having to choose between Emory for Little Emma or that golfing community for you and the better half.  (The assumption being that people followed another old saw of these columns and had virtually all of their money in stocks when the market crashed!).  Now in the good old days it would have been a nonissue because college cost much less and working parents had more secure pension plans. 

What I find most interesting in the advice given in these articles is that, for people who have followed the ideological imperative to consume, the action needed to address the problem reflects another key ideological imperative, to behave always in one’s own self-interest.  In this case, the parents put their own self-interest above the betterment of their children, saving for retirement while letting the kids figure out college on their own.  Putting the self first supposedly ensures that all family needs are met, since you’ll have your little nest egg and the children will surely scratch up the money for tuition and then go directly from graduation ceremonies to a high-paying job.

As logical as it seems, the advice seems somehow wrong to me.  For one thing, to make it work, the children will usually have to borrow money.  Whatever the total earning capacity of all family members, there is less disposable income if someone is paying interest to a bank.  Doesn’t it make more sense to have the parents pay for college and the kids return the money to the parents over time?  Instead of the bank getting the interest, the parents would, which could make for a more stable retirement.  That is, if the children hold up their part of the bargain—and in a world gone selfish, maybe that’s too much to ask.  At least that’s what the financial columnists would lead you to believe.