NEW YORK (MONEY Magazine) - Ten-year-old Moriah Sells is in the Gifted and Talented Program at her elementary school and has announced that she wants to go to Harvard, followed by Harvard Law.

Her ambitions may change 10 times between fifth grade and freshman year. Still, her mother said, "You have to take a child's dreams seriously. If Moriah can get into Harvard, I want her to go."

Parents of a Harvard student today should expect to pay nearly $170,000 for a Harvard education. By the time Moriah goes to college, four years likely will top $200,000.

Most parents looking at such gilt-edged schools can expect to get some financial aid. But they still may have to come up with a hefty portion of college bills that could top $500,000 for three kids. So how can the Sellses -- or any family, for that matter -- save that kind of money?

Travis and LaTricia Sells, both 36, have saved $30,000 in 401(k)s plus $3,000 in an emergency fund. They also have $170,000 in equity in their spacious home in a desirable Houston neighborhood. And they own a second house nearby worth $65,000, which Travis is renovating and planning to rent.

But that's hardly enough to educate three daughters, let alone retire.

Although their annual income is $130,000 (LaTricia, a pharmaceutical salesperson, makes $70,000; and Travis, a realtor, earns about $60,000), the Sellses have found it difficult to set much money aside.

Child care for Moriah and her sisters -- Charity, age 8, and Laurryn, 4 -- costs $1,000 a month during the school year, more during the summer. Then there are church donations, dance lessons, clothes and other sundry items to buy.

The family also takes about five trips a year to places such as Jamaica, New York City, San Diego and, of course, Orlando. Their plane tickets are free (Travis works evenings in customer service at Continental Airlines), but the costs mount. In addition to $3,000 in credit-card debt, LaTricia has a debt-consolidation loan for $5,000.

To get the Sellses on track, MONEY turned to Philip Taggart and Lowell Bass, who are CEO and chairman, respectively, of the Taggart Financial Group, a Houston investment advisory firm.

In a meeting with the couple, Bass asked what their absolute top priority was. The kids' education, LaTricia said.

Then Taggart lowered the boom. Two-thirds of Harvard's undergraduates receive financial help, but aid is based on need, not merit. The Sellses' high income means that any financial aid would meet only a portion of the tuition burden.

They must set aside as much as they can now and do so in a way least likely to jeopardize their eligibility for aid.

But simply saving more won't guarantee that they can educate their three kids and retire comfortably.

Fortunately, the Sellses have two money-making opportunities. First, LaTricia is getting an M.B.A. in global management and is hoping for a promotion and a raise as a result.

Second, Travis wants to invest in real estate in their neighborhood and has the background to do it right. He also has access to inexpensive capital in their house. Given that, the advisers suggest a three-part plan.

1. Jump-start savings. Once LaTricia's M.B.A. puts her on the management track, she says she could easily double her $70,000 salary in five to seven years. As that additional income comes in, she can plow it straight into savings.

Which account is right for you? Before you put aside a single dollar for your child's college education, consider these four questions. YES NO Are you saving the maximum in your retirement plans? Good. You're ready to save for college. Fully fund your 401(k) first. You can borrow against it for college expenses if necessary. Is your adjusted gross income under $220,000 (for couples filing jointly) or $110,000 (for singles)? You qualify for a Coverdell Education Savings Account. Withdrawals for certain education expenses are tax-free. A state 529 college savings plan offers tax-free growth no matter what your income. Do you expect to qualify for financial aid? Go to princetonreview.com/college/finance/EFC to estimate your kid's chances. Save in your name, not your kid's. Under federal aid rules, 529s and Coverdells are the parents' assets. Any savings vehicle will do. Do you want to manage your own money? You can with a Coverdell,a Roth IRA or a taxable account. With a 529 you get a choice of managed portfolios that match your child's age and your risk tolerance.

The best place for her stash is in her 401(k). LaTricia now sets aside just 5 percent of her pretax income, but she can contribute 18 percent, or $12,600, at her current pay. And she should aim to max out.

Using a retirement plan for college savings, Taggart acknowledges, isn't always prudent since it puts parents' retirement at risk. But there are some compelling reasons to consider it.

LaTricia can borrow up to half of her 401(k) to pay for tuition. Plus, when colleges assess the family's financial need, 401(k) assets typically won't reduce aid eligibility. And if the Sells kids don't go to expensive private colleges or manage to get generous aid, the assets in LaTricia's 401(k) can stay put for retirement.

2. Set future savings goals. Once LaTricia fully funds her 401(k), the next step is for each parent to set aside the maximum $3,000 apiece in Roth IRAs.

With Roths, they can make penalty-free withdrawals for retirement or college tuition (after five years); and like 401(k)s, Roths usually don't reduce aid eligibility.

If they manage to max out LaTricia's 401(k) and their Roths, they can open a 529 college savings plan for each child. Texas offers no tax benefit to use its state plan, so Taggart recommends Nebraska's plan, which includes low-fee Vanguard funds.

3. Use home equity to build wealth. With LaTricia's savings earmarked for school, the couple need a backup plan for retirement.

Before Moriah was born, Travis renovated, rented and sold three homes in his neighborhood, and he'd like to do so again.

Fortunately, his neighborhood is hot. And Travis' job makes him one of the first to hear about what's coming on the market.

So Taggart suggests the Sellses refinance the $95,000 mortgage on their primary home, now worth $265,000, and take out another $120,000 in cash.

"It's never a good idea to refinance a house to provide cash for idle spending, but that home equity is invaluable if you leverage it to build wealth," he says.

With that money, they can pay off their $8,000 in consumer debt and buy a fixer-upper.

Taggart admits that adding debt when the couple are already struggling to save is risky -- the refinancing would double their $1,182 monthly payments.

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He recommends it only because Travis has a successful track record in real estate investing. If the houses don't sell, Travis should be able to rent them out until the market takes off, giving him income to offset the higher mortgage costs. When they retire, Travis can sell any houses he still owns.

By the end of the meeting, the Sellses were pumped. But they will need luck -- and even then the couple have a tremendous amount of work to do.

Once out of the office, Travis said, "We get so busy just getting through every day. It's amazing to take a step back and realize that we're surrounded by opportunities we just didn't see."