Saving for College -- Fast

Here's a situation about a ba-zillion Americans find themselves in every year:

Our kid is 14 already! How do we save enough for college in 4 years?

The answer from Money:

Don't bother, says our expert.

Here's the situation:

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?

So somehow these people were smart enough to save $300,000, but weren't smart enough to see college coming? Am I missing something?

Anyway, they are at least on the right track in their thinking now:

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 too 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.

Money's bottom line:

Scholarships and loans are the way to go.

And they recommend that the parents keep their $200 per month:

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.)

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.

Key thought: There are no scholarships for your retirement. This is similar to what I commented in "Saving for Retirement vs. the Kid's College" and "Seven Ways to Balance Retirement Planning with Your Children's Education."

Comments

What you're starting to see is all these folks who are laid off or their spouse has lost a job that are now looking for legitimate work. And the work-at-home option is very appealing to them.