Guest Post By: Jacob Evans
Student loan debt is tiring and it can cause young adults to delay major life milestones for years to come, especially if they choose an extended repayment plan or simple do not make payments.
When it comes to your student loan debt, you may not see it as a priority at first, but as you start to get older, it will become one of your top priorities. This type of debt will haunt you and stick with you for the rest of your life, so it is better to pay it off early and save yourself the stress, interest payments, and hassle.
As a young parent, you should want to pay off your student loan debt as quickly as possible, so that it does not take over your life. While I do not have a child yet, I do want one in the future, and I made sure I paid off my student loan debt as soon as possible.
This was so I could start saving for when I do have a child and so that I will be able to focus my finances solely on my baby and our necessities as a family. I did not want student loan debt to rule my life once I have a child, so I eliminated it, and it is no longer an issue.
If you are a young parent, here are some reasons why you should prioritize paying down your student loan debt.
Start an Emergency Savings Fund
If I asked you if you have an emergency savings fund, what would you say? If you are anything like I was a few years ago, you would just laugh. I did not have any emergency savings, let alone extra money to stash away somewhere.
I learned the hard way one day about why it is so important to have an emergency fund account and that was the day my car’s transmission failed and I had to pay a hefty amount for a new one. Scary, right? I thought so too.
An emergency savings account will allow you to set aside money for unexpected things that happen from a blown transmission down to a dead car battery or even medical bills that aren’t covered by insurance.
Focus on Your Child’s Education
Once you have eliminated all of your student loan debt, you will be able to focus on saving money for your child’s education. Yes, you can save while you do make student loan payments, but you will not be able to save as much.
Think about it this way. If you make $250 minimum monthly payments to your student loans already, once you have paid off your student loans, you can take that $250 and place it into your child’s education fund. You will be able to grow their savings quickly.
Once you are ready to start saving for your child’s education, you can look into different plans such as a prepaid college option or a 529 plan.
This may be able to help you and your child avoid student loans when they head off to college (even though this may seem like ages away). At the very least, it may allow you to only take out forgiving federal student loans instead of the riskier private student loans.
Save for Your Retirement
As a young parent, the last thing on your mind right now may be retirement, but it is important that you make sure you do save for your retirement or else you will be scrambling around once you enter your 30s or 40s. If you are tight on cash, you can put away a little at a time until you can reach a full 10 percent or so contribution amount.
One of the things that I recommend is you check with your employer to find out if they have a 401k program and if so, do they contribute to it on your behalf or match what you put in. Some employers will match up to 5 or 10 percent of what you put in and if they do, then you should participate as this will help you build up your 401k.
Pay Down Other Debt
Lastly, you will be able to pay down your other debt once you have paid off your student loans. I used the snowball method to pay off all of my debt and it worked. You could do the same. The basic concept is that you pay off the smallest debt first, then move to the next smallest debt, and so on until you reach the end.
Start Now for a Debt Free Future
You do not want to put your student loans on hold, trust me. I made payments for years and barely paid off any of my loan balance. It was horrible. If you have student loan debt, tackle it now, so that you can build a better financial future for you and your family.
Make the last of your student loan payments and you will be able to contribute to your child’s education fund, you can start a savings account, and you can even start to save up for retirement. Take the leap like I did, buckle down, and get that student loan debt paid off.
Jacob is a self-proclaimed personal finance enthusiast and blogger. Catch up with him @DollarDiligence!