Education trumps retirement savings for single parents

Single parents are more likely to skip saving for retirement to provide for their children's education.

Nearly half of single-parent respondents in a recent study from Allianz identified their children's education as their primary motivation for developing and executing a long-term financial plan. Only 26% of other modern families and 39% of traditional families said the same.

"We find that a little disturbing because there are grants, scholarships and student loans to pay for education. … You can't get a loan ... or a scholarship for retirement," says Katie Libbe, vice president of consumer marketing and solutions at Allianz Life.

Given that single-parent families tend to have lower total household incomes, the results aren't surprising. Single-parent respondents had an average household income of $85,000, and 64% of those respondents receive no child support as part of their income. Meanwhile, traditional families had an average household income of $113,000, and other modern families — such as boomerang, multigenerational and same-sex parent families — averaged $101,000.

Libbe acknowledged that single parents questioned for this survey don't represent the standard income level for single parents, who usually sit closer to the poverty line. The survey required respondents to have a minimum annual household income of $50,000. She says the purpose of the survey was to find out how different types of families with the means to save are doing so, and if they're even saving at all.

Libbe says it was surprising that single parents placed more emphasis on education saving. Many single parents are only saving for one goal, which could cause serious financial trouble in the long run, she says. Single parents and all other non-traditional families are significantly more worried about running out of money in retirement than respondents from traditional households.

"For single parents, it's a family-first mentality," Libbe says. "They're struggling as the sole decision maker in the family, and they're putting their own financial futures at risk."

Nevin Adams, director of the American Savings Education Council, specializes in helping people determine what is needed to ensure lifetime personal financial independence. He says regardless of how many incomes a household has, it is important to develop a savings plan for specific things rather than a general savings account, which he says is the worst way to attempt to save money.

"Savings is about paying yourself, so the best way to do it is to make savings a priority," Adams says. "Instead of treating it as what's leftover after everything else, it's the thing you do first because if you don't have a goal it's easier to cheat on."

Overall, Libbe says the most surprising finding was that all types of families are talking more about money with their kids.

She says talking about the cost of college and all associated expenses is helping future students realize how much goes into planning to pay for school. Libbe advises teenagers and parents to compare in-state and out-of-state tuition, and to take into consideration travel costs to and from school and the cost of living wherever they want to go. She says conversations like this will help parents save more on their children's education and help students avoid education debt.

"Get your kids involved in the process to be more educated about where they're going," Libbe says. "They should emphasize getting a good value for what they're paying."

Libbe also suggests parents should make sure they're contributing to any kind of employer savings plans before they start planning to save for their children's education. Though it may be difficult to save for both at once, Libbe says it will be worth it when retirement comes around.

Adams says it's natural for parents in all types of families to want to help their children avoid education debt. And if young people exit college with thousands in debt, they'll end up putting off their own retirement and effectively create a cycle of non-retirement savers, he says.

"But it's important to remember there are alternatives for education, and retirement not so much," Adams says. "People always assume they can do it later ... but it never ends up happening."