Saving Money For College Education

1001 WordsJan 28, 20175 Pages
saving money for college education as opposed to retirement, there are several other factors that contribute to Gen X’s lack of funds for retirement (Powell, 2015). Gen X carries the most debt in comparison to Baby Boomers and Millennials. According to a study by the Federal Reserve Bank of St. Louis, Gen X owes an average of $142,007, mostly comprised of mortgage debt. In comparison to Baby Boomers, Gen X held about 60% more debt at age 44 than the earlier cohort. In addition, the household income at the same age was only about 5% higher than Baby Boomers. Therefore, while Gen X is not making much more money than Baby Boomers, they have accumulated more debt, and are reducing debt at a slower pace than any other generation (Matthews,…show more content…
The first step in creating a retirement plan to last at least 25 years is to set short term goals, understand good debt versus bad debt, and how to prioritize paying off debt to allow the additional income to be saved for retirement. Bad debt, such as personal loans, car loans, and credit card debt carry high interest rates, and do not represent a future investment; bad debt loses value over time. Good debt, or debt with a low interest rate, can be viewed as a future investment. This type of debt includes mortgages, business loans, and student loans (Von Tobel, 2014). Paying off bad debt first reduces high interest payments, which then can be applied to an overall retirement savings plan. Approximately 50% of credit card users carry a month-to-month balance, and are required to pay accrued interest charges. According to Ghilarducci, actual credit cards should stay home, in a hard to reach place to be used only in the case of an emergency. While it is critical to pay down credit cards, high interest loans, and avoid carrying a balance, it is also important to make solid financial decisions pertaining to good debt. Paying off a mortgage in 7 or 15 years will raise the current monthly payment, but will save money overall by qualifying for lower interest rates, and
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