The short answer to this question is YES!

This can be confusing, but Dave Ramsey Baby Steps puts them in this order as a priority, not as a distinct timeline. Not many people will be done saving for retirement (entirely) before they start saving for college. Many people have children while they’re in their 20s through their 40s. . Yet, they participate in 401(k) s and fund IRAs into their 50s and 60s, when their kids are either in college or have graduated.

This approach does not contradict the principles of the seven baby steps; it simply prioritizes beginning retirement savings first. It’s important not to pause or reduce retirement contributions at any stage of life—ideally maintaining a savings rate of around 15%. Unlike college expenses, there are no loans, scholarships, or significant ways to offset the cost of retirement.

Education funding, on the other hand, is often a moving target. Families may be uncertain about how many children they’ll have, how many will pursue higher education, whether they’ll choose public or private schools, and what level of financial aid or scholarships they might receive. While retirement also has its variables, the overall cost tends to be more predictable and confined within a narrower range.

In this week's article, we will explore the balance and strategy of saving for both.

Utilize the time value of money for both goals

While the expenses for retirement and college may seem large and daunting, saving early will make these financial goals much more attainable.

Let’s look at some specific numbers for both goals.

Saving for College

Saving Early

Saving just $165 a month for 18 years and getting a hypothetical market return of 7% produces a final value of $70,000, making entering college much less stressful and leaving many options open, even if that doesn’t quite fully fund a degree for your child.

Saving Later

What if you didn’t start saving until your child was in high school, and you know you have to make up for lost time? Let’s say you put away $500 a month. At the same rate of return, you only accumulate $26,000 by the time your child enters college. With the shorter time horizon, the compounding effect is much less powerful.  A shorter timeframe also makes you more susceptible to hitting a market downturn and reducing your average return.

We still encourage parents that it is never too late to save. Even saving only $30,000 (for example) versus $0 for college is still much more desirable.

Saving for Retirement

Investing Early

If you start investing in a ROTH IRA as soon as you get your first job out of college, put away $300 per month, and stay consistent at that level until you can first start to draw Social Security, you would accumulate $2,200,000 at the historical average market return of 10%.

Investing Later

If you don’t start investing until you are 52 and again, to make up for lost time, you save $1,000 a month, and you average 10% over a 13-year period, you only accumulate $171,000.

Like the college example, saving something is better than saving nothing, but it still significantly limits your retirement options.

Saving for both simultaneously

In the early-saver example, you would only need to save a combined $465 monthly to have $2,270,000 to meet your college and retirement goals.

In the late-saver example, you save a combined $1,500 monthly (over three times more than your budget allows), yet you only accumulate $198,000 to attempt to accomplish these two significant goals.

It might not be easy to  start early on both goals, (especially if you have four kids rather than one), but saving early allows compounding returns to work for you and your goals become more manageable. Trying to suddenly build an extra $1,500 or more into your budget to invest/save each month is much more challenging..

Have clear goals  for both life events

With retirement being a higher priority and a little easier to predict, couples should consider their retirement plans early in their marriage, including when they want to retire, where they want to live, whether they wish to travel, what types of hobbies they want to pursue, and how charitable they want to be, among other considerations.

The earlier you do this, the better. Planning in advance can make achieving your goals easier.

Let’s imagine you’re a late saver who dreams of traveling the world, dining out five nights a week, joining multiple golf leagues, and being an active philanthropist. If you only begin saving about ten years before your desired retirement, those goals may no longer be realistic.

The same principle applies to college planning. As a couple—and eventually as a family—it’s important to have open conversations about your educational goals. Will your children attend public or private schools for K–12? Do you hope to help them attend a private university or even pursue graduate degrees? If those conversations and savings efforts don’t begin until your child reaches high school, it will likely be too late to fully fund those ambitions without relying heavily on loans (which we want to help you avoid).

When balancing these two major life goals—retirement and education—there’s room for flexibility. Every family has its own values and priorities. For instance, if you received little or no financial help with your own education and believe your children should largely fund theirs, you might decide to allocate more than 15% of your income toward retirement. Your focus would lean more heavily toward long-term financial independence.

Conversely, some families place a high value on education and are willing to live a simpler retirement lifestyle to help their children graduate debt-free. Most families, however, aim to find a thoughtful balance between the two—protecting their future while supporting their children’s educational opportunities.

Cost-saving strategies for college

Returning to the central theme, you can and need to save for both retirement and college simultaneously; however, there are helpful strategies beyond simply saving early for college. 

A typical scenario involves a family with a household income under $100,000 and 3 or 4 children who wish to attend a private school. Reiterating that it is essential to keep retirement funding around 15%, saving for multiple children’s college, even if you start early, you probably will fall short of funding a private school for all your children, unless they get scholarships that mainly cover tuition, room, and board.

Taking college courses or dual credit classes in high school can be an excellent way to reduce the costs of a 4-year undergraduate degree. , Also, a suggestion is to find schools that offer a 3-year degree opportunity in your major. If you already have some college credits from classes you took in high school, you can obtain a 4-year degree in approximately half the time and at a significantly lower cost.

Another way your children can obtain a degree without you having six figures in savings is to go to a branch campus or a nearby college. This allows them to commute, saving on room and board costs, which can significantly reduce college expenses. Additionally, attending a local tech or community college and earning a low-cost associate’s degree will allow you to pursue a bachelor’s degree later, potentially reducing your total bill.

A labor-intensive method to reduce higher education costs is to apply for every scholarship or grant you can find. Many parents make the mistake of thinking that because their son or daughter is not a star athlete or the class valedictorian, they have no chance at scholarship money. However, there are numerous scholarships awarded based on various factors, so almost every student is eligible if they look hard enough. Be proactive; scholarships will not chase down your child and beg you to take the money.

Working during college on campus by being an RA or doing work study can also be a good way to lower your college bill if you are light on your 529 balance.

Summary

Baby step 4 of Dave Ramsey’s plan is to save 15% toward retirement, and this should be started as soon as you have an acceptable emergency fund in place (baby step 3). Then, as soon as you have a child, a college fund should be started, which is Baby Step 5, but never at the expense of retirement funding.

As we mentioned, the time value of money is important, so even if you only have $10 per month to start saving for college, it would be wise to do so. It is common for clients to struggle to save a significant amount for college after prioritizing retirement savings, but we encourage you to save a little, and perhaps later you can save more.

Like so many goals and important events in life, effectively funding your retirement and education accounts requires being proactive, intentional, and thorough. A winning mentality and working with your spouse and children will be vital. Another universal skill is communicating effectively so that everyone is on the same page and there are no significant surprises that you haven’t discussed and planned for. Both goals will evolve, and some adjustments will need to be made, but one constant that needs to be maintained is funding both early and often. For most people, retirement and education funding are the two largest and most important financial goals. Therefore, it is essential to discuss and work with your financial advisor on how to address these goals efficiently simultaneously.

Our Financial Coach would also be happy to meet with you to discuss ways to negotiate the cost with colleges, find scholarships, as well as help you to discover overall strategies to go to college debt-free.