Savings Showdown: College vs. Retirement

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

Before you answer, would it make you feel any better knowing that plenty of others 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. Frankly, so are we.

You're not the only one looking out for No. 1
According to an Allstate survey from a few years back, 33% of respondents with children younger than 18 said that college savings took a back seat to their own retirement. 46% were saving equally for college and retirement, and 14% of selfless souls earmarked most of their savings for education, while funneling whatever was left over into their retirement accounts. The remaining 5% said they were putting off retirement savings altogether until the kids finished college. Here's hoping that they won't have to work forever.

If you can't save for everything, we side with the one-third of parents padding their own future savings over those of their kids. It's not self-centered -- it's pragmatic. College is part of a broader financial plan. In other words…

Sorry, kids, you get the short end of the stick
There are lots of ways to pay for school. Loans, financial aid, the Coverdell ESA, 529 plans and prepaid tuition can be 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, nor scholarships to gain entry into Sunset Years Retirement Village. If you don't have money for retirement, guess what? You can't retire. (Check out our Rule Your Retirement newsletter service if you want to make sure you're saving enough.)

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 Foolishly handling the financial hassles of higher education:

Dayana Yochim is glad her parents did not read this article until the tuition bill was paid in full. She has been schooled by the Fool's disclosure policy.

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