Start saving now, college grads

When I graduated from college I was 21 and 5 months pregnant. I had other things on my mind than saving for retirement.  .  . like rent, food, graduate school, paying off the hospital and doctor bills (it was a pay as you go baby).  I put it off until I was about 48 and the children were launched.  Then I opened a tax deferred account through TIAA-CREF and started setting aside the maximum allowed.  Since I didn’t go back to work full time until about that same time, I was really behind.  If you’re starting out, don’t do what I did.

Here's how interest compounds over time: If you save $10 a day at age 25, you'll have more than $1 million by age 65, assuming an 8% annual rate of return. If you start at age 35, you'll have $445,000. At age 45, you'll only have $180,000.

http://online.wsj.com/article/SB10001424052702304432704577348052844503384.html

Return on investment of a college education

There are lots of reasons to go to college, but a nice nest egg when you retire isn't one of them. If your parents had invested your first two years of college expenses in IRAs that you couldn't raid, by age 65 you'd be well set--much further ahead than attending an Ivy League school, or even any college at all. I have a scheme that just might get you the best of both worlds, because really, I'm quite a fan of education. I'm the third generation in my family to have a college education. It's also a good place to meet your future spouse, my grandparents, parents, and my husband and I all met in college.

When your child graduates from high school insist that he/she get a job and work for at least one year--fast food, retail, construction, agriculture worker, county flagman, groundskeeper--you get the idea. It would be nice if they can live away from home and support themselves, but that isn't essential. Then take the amount of money it would cost you for a year at a state university (I have no idea what that is these days, $12,000?) and invest it in the stock market (but not in their name, because otherwise they'll take it the first time they want a car, a nice wedding or new furniture).

After a year in the trenches or behind the counter, they'll probably be better able to take advantage of what college has to offer, and by investing for them, you'll insure they have a nice retirement in the distant future. This will really help if they want to go out and save the world in a low paying job like social work or library science, positions that have lots of simple pleasures but don't pay particularly well unless you want to claw your way to the top and become a manager/director.

I know this works, because I figured it out one day standing in line at the Tremont Goodie Shop in the 1980s while grieving that my children said no to college. Unfortunately, I already had their college money (for the first year) in accounts with their SS# and name and it later disappeared for consumer goods that will be gone long before they retire. But in case you don't believe an ordinary librarian, go read this article.

College: Big Investment, Paltry Return

"Over the past 30 years, the S&P 500 Index averaged about 11 percent a year. Only 88 schools out of the 554 in the study had a better return than the S&P. Everywhere else, students would have been better off—financially, at least—if they invested the money they spent on their college educations and never set foot in a classroom." -- And I would comment that the ROI predicted for any of these colleges is far higher than the 1%-4% I've read in other sources.