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Saving for college -- fast
Our kid is 14 already! How do we save enough for college in 4 years? Don't bother, says our expert.
October 4, 2005: 10:32 AM EDT
By Walter Updegrave, CNN/Money contributing columnist

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NEW YORK (CNN/Money) - I'm 40 and my husband is 50. We've got about $150,000 tucked away in retirement accounts, another $125,000 in home equity and $20,000 in cash and other investments.

Our problem is that we haven't really laid out a solid college savings plan for our 14-year-old child. We could earmark about $200 a month for that, but that wouldn't do much considering our child will be entering college in a relatively short time. Aside from hoping for a full scholarship to magically appear, what are our options?

-- A.J., Fairfax, Virginia

Hey, I've got news for you. That wacky scholarship-style solution is probably one of your best options at this point. And it certainly has more potential than diverting money that you should be putting away for retirement into a college fund that's not going to grow very large over the course of four years anyway.

Granted, unless your child has done something truly amazing -- like score 1600 on the SATs or average 30 points and 20 rebounds a game for the high-school hoops team -- the chances of your kid getting a free ride aren't very high.

But given the plethora of different types of financial help around for students these days, it's not to much to hope that your budding scholar would be able to qualify for some sort of scholarship or financial aid. At the very least, your little genius should be able to come up with some sort of a work-study job that helps defray expenses a bit.

Scholarships and loans are the way to go

And remember, there's always the option of taking out college loans. I'm not just talking about loans to you, either. There's nothing wrong with asking your child to take on some debt too. You can always help pay if off later if your financial situation allows.

To scout out some of the financial aid possibilities, you can check out such sites as, The Princeton Review and FinAid.

As for that $200 a month you say you could earmark for your kid's college tab, I recommend you instead sock that away in some sort of retirement savings account. Increase what you're kicking in to your 401(k) or, if you're already maxing out, consider investing in a Roth or traditional IRA. (Remember, you can always pull out contributions you've made to a Roth without paying tax or penalty.)

There are no scholarships for your retirement

You've got a nice little nest egg going with that 150 grand. And having a good chunk of equity in your home will provide an extra cushion. But it's not as if you've gotten your retirement paid for and you can coast from here.

You've still got to fatten it up a lot more between now and the time you call it a career if you want it to generate enough income for you and your husband to live comfortably during a retirement that could easily last more than 30 years.

So make saving for retirement your first priority. And let Junior get by on whatever package of scholarships, aid, work-study jobs and loans you can cobble together, plus whatever you might be able to kick in from your earnings.

This way, your child should still be able to get a perfectly good education, and you should be able to keep your retirement plans on track.


Click here for more on maximizing your financial aid.

Getting started saving for college? Click here.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World."  Top of page

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