Being the good parent that you are, you want to send your little Einstein (or little Norah Jones) to the college of his or her choice. But does that mean saving for school should be your No. 1 financial priority?
Paying for school is an important goal, but it's only part of a broader financial plan. While developing your saving-for-school strategy, keep these other priorities in mind.
Pay off high-interest debt: It doesn't make sense to earn 4% to 10% on your college savings when you're paying 11% to 20% on your credit card debt. If you owe more than $500 on any loan that charges double-digit interest, pay that off first.
Build an emergency fund: You need a stash of accessible cash available to extinguish the potential hazards of unexpected expenses. If you don't have the money available when the furnace blows up, the roof falls in, or your department gets "downsized," then you'll have to turn to the credit card, retirement fund, or college cookie jar. This is not good. Keep three to six months' worth of expenses in a money market investment.
Get adequately insured: Purchase a 10- or 20-year term life insurance policy to replace the income (or child-rearing and home-keeping services) of any members of the family who join that great frat party in the sky. Also, look into disability insurance, since it is more likely that a worker will be temporarily out of work (due to an injury or illness) than permanently (due to kicking the bucket).
Save for retirement: Do not sacrifice retirement savings for college savings. If you don't have enough to cover tuition, your student can apply for financial aid and borrow money. However, there are no scholarships or loans for retirees. If you haven't saved enough to retire, then you can't.
For more information, check out The Motley Fool's Guide to Paying for School: How Cover Education Costs From K to Ph.D.
