Dave Ramsey Warns Americans Against Prioritizing Kids' College Funds Over 401(k)s — Says It Doesn't Make You 'Bad Parents'
Dave Ramsey, a renowned personal finance expert, has shared his views on the prioritization of 401(k) plans over college funds. He believes that saving for retirement should take precedence over saving for a child’s college education.
What Happened: Ramsey, in an email to TheStreet, emphasized the importance of prioritizing retirement savings over college funds. He stated that while saving for a child’s college education is a noble endeavor, it should not take precedence over retirement savings, reported TheStreet.
“Setting aside a college fund for your kids is a really nice thing to do, if you can actually afford that kind of thing,” Ramsey wrote. “But kids can also further their education by getting good grades, applying for scholarships, choosing a school they can afford and working their tails off while attending classes.”
Ramsey also emphasized the various ways to obtain a college degree without relying on parents’ savings. He then stressed the necessity of retirement savings, stating that everyone will eventually retire, unless they pass away before reaching retirement age.
He also stressed the need for early financial preparation for retirement. Ramsey advocates for saving as much as possible to ensure a comfortable life during the golden years.
Ramsey addressed the financial constraints some parents face, stating that not being able to contribute to a child’s education “doesn't make them bad parents.” Ramsey is a strong advocate for Roth IRAs as a preferred investment vehicle, citing their flexibility and long-term benefits.
Why It Matters: Ramsey’s views on retirement savings and college funds are consistent with his previous statements on financial planning. In a recent article, Ramsey encouraged parents to set realistic boundaries for their children’s college education. He advised against taking out student loans if parents cannot afford their children’s tuition.
Earlier this year, Ramsey also criticized workers who abandoned their 401(k) plans during market turmoil. He stressed the importance of a disciplined financial approach and the need to prioritize retirement savings.
However, Ramsey’s advice has not always been well-received. In a separate incident, he advised a 28-year-old caller against draining her 401(k) and IRA for a house purchase. His advice was met with criticism from some who felt it did not consider the caller’s individual circumstances.
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