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Yes, You CAN Send your Kids to College - and Retire

© Ann Needle

Here you are, noting that four years of college for your two year old could set you back more than $144,000,* and that you'll need about 70% of your annual income to live each year of retirement in comfort. It's enough to make you wonder if you should give up eating and just put it all away for the future.

Before you pass on the next meal, take heart - you can save successfully for your child's education without spending old age in poverty. It will take some planning, a little discipline, and the acceptance that nothing is guaranteed, but successfully saving for several long-term goals isn't impossible.

Know What You Need

Your first step is to figure out how much you can put away altogether. While knowing how much you need to send your child to college or to retire is helpful (and a good motivator), it won't help if you don't put the money away in the first place.

An interesting way to figure out what you can save is to go to Financenter.com's How Much Am I Spending? calculator (http://www.calcbuilder.com/cgi-bin/calcs... and see how much you can "squeeze" more savings out of your household budget. Here you can also see how saving money on everyday items such as food and entertainment can give you more to save toward long-term goals.

Use What Could Get You There Quicker

Saving money is one thing, but making it work harder is vital - and, with the right tools, less painful than actually putting your savings away.

For both college and retirement, it makes sense to put as much as you can into stocks, as these investments have the best returns over time. Because stocks also tend to go up and down in price more than other investments, it's best to use them earlier in a savings/investment cycle rather than later. That way, you give your money potential long-term growth along with time to ride out any down cycles. You can always switch some of this money into "safer" investments (such as bonds and money market accounts) as you get closer to each goal.

There are also many accounts available to help both college and retirement dollars grow faster, thanks to special tax advantages. Though none of these accounts come without caveats or limits, they are some of the best ways you can save through the years.

For college - Check out whether your state has a college savings (or "529") plan, which offers a list of benefits that only begins with the potential for tax-deferred earnings on what you save. Your state may also offer a prepaid tuition plan, which carries many of the benefits of college savings plans with a few extra limits. To find out more about these plans and whether your state offers either one, check the College Savings Plans Network at http://www.collegesavings.org.