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College vs. Retirement? Retirement Wins

Whose future is more important in your household: Yours or your kids'?

Before you answer, would it make you feel any better knowing that one-third of those with educable children in the home put their retirement savings ahead of their offspring's college funds?

Go ahead, admit it. You're a bit relieved to know that others are shortchanging Junior's college savings account in favor of their own "golden years" account. In fact, according to a survey by Allstate (NYSE: ALL  ) , 33% of respondents with children younger than 18 say that college savings is priority No. 2. Forty-six percent are saving equally for college and retirement, and 14% of selfless souls earmark most of their savings for education, while funneling whatever's left over into their retirement accounts. The remaining 5% are putting off retirement savings altogether until the kids are through college. Here's hoping that they won't have to work forever.

If a choice needs to be made, we side with the one-third of parents padding their future savings over that of their kids. It's not self-centered -- it's pragmatic. (As my colleague Robert Brokamp points out, college is just part of a broader financial plan. He also eats his children's scraps, so weigh his input accordingly.)

There are lots of ways to pay for school -- loans, financial aid, the Coverdell ESA, 529 plans and prepaid tuition are a parent's retirement plan saviors. And there are other choices for cash-strapped students pursuing an education (put it off, attend a cheaper junior college for a few years, apply for a work-study program).

On the other hand, there's no retirement scholarship -- no PELL grant for senior citizens or scholarships to gain entry into Sunset Years Retirement Village. If you don't have money for retirement, guess what? You can't retire.

Before you set up your child's golden future, pay off high-interest debt, establish an emergency fund, get adequate insurance, and beef up your retirement savings. After those items are crossed off your list, you can start spoiling the youngsters.

More on handling the financial hassles of higher education Foolishly:

  • Here's how one parent manages his sons' college investments, and some resources for the resourceful parent.

  • Asset allocation isn't just for retirees. There are typical allocation guidelines designed to protect Buffy's lunch money from the stock market's ups and downs.

  • Even with rising tuitions, college costs are just a fraction of a fraction of what you'll burn through in retirement, and they may not even be as steep as you anticipate.

  • If you're starting late with the college savings program, don't fret. One in five parents hasn't put away even one dime, according to a Sallie Mae study. Follow these six tips for slacker parents.

If you need help or just a sense that you're not alone in getting your ducks in a row for the future, it costs you nothing to try Motley Fool Rule Your Retirement. As with all our newsletters, there is no obligation to subscribe and, as always, the Fool's money-back guarantee stands behind the offer. Click here to give Rule Your Retirement a try.


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