Over the last month, I’ve gotten a stack of graduation announcements in the mail — and I’ve even attended a graduation or two. Some are high school graduations, some are from college and some are from graduate school. But no matter what level a person graduates from, there’s a certain sense of wondering what comes next. Even for those grads with a job lined up, there’s a transition process. It doesn’t help that quite a few people are getting degrees but aren’t so sure that they’ll be able to find a job to match.

The Best Laid Plans…

School, for some people, is just one more step on a very set path. I went to college with more than a few folks who were going to get a degree, land their dream job and work their way up the ladder — you probably did, too. But now, more than ever, the real world is throwing a monkey wrench into such plans. Adaptability has become a necessary skill for any recent grad. Maybe that dream job isn’t waiting for you as soon as you pick up your degree but that doesn’t mean that you can’t succeed. You can:

• Freelance until the right job comes along (or even freelance long-term)
• Volunteer with an organization like the Peace Corps
• Find a project of your own to work on
• Team up with a few of your classmates who are in the same boat

The possibilities are endless — even without considering taking a job, any job, just to get by. You may have considerations beyond paying for room and board when it comes to finding a job — student loans, anyone? — but assuming that your dream job is the only way to cover your obligations means missing out on a lot of other opportunities.

Transition As Far As You Want To

There’s a feeling that, as soon as you graduate, you must turn into a full-fledged adult, complete with a mortgage and a car payment. But you don’t have to make a complete transition — and in many cases, it’s probably better not to. You can pick and choose what parts of your lifestyle and your spending you want to change after graduation — maybe you want to stick with living with a couple of roommates, or maybe your beater will make it a couple more years. There’s nothing wrong with keeping a college lifestyle after you’ve graduated. Even moving home after graduation is becoming fairly common, and that’s a good thing for many recent graduates. As long as you can come to a good arrangement with your parents, the financial benefits of living with your parents and avoiding setting up a separate household of your own are pretty impressive.

There are plenty of opportunities out there right now — just because you’re graduating in the middle of an economic depression doesn’t mean that you’re in an impossible situation. Instead, with a little adaptability, it’s possible to forge a new path that will work out better for you in the long run.

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I opened up a can of worms with a friend a while back: every month, rain or shine, she puts away money for her daughter’s college education. It’s the first place she puts any portion of her pay check. It’s great that she’s really devoted to a savings goal — but lately there have been more than a few rainy months. That aggressive savings plans is making it very difficult for this friend to actually make progress on her other financial goals, like paying down debt and saving for her retirement.

The Can Of Worms

I don’t think that a parent is necessarily obligated to pay for his or her child’s education — and I told my friend that. The fact of the matter is that there are a lot more options for finding money for college than for paying down debt, making it important to help yourself before helping your kids.

But my friend’s response boiled down to the fact that she would feel selfish and even like a bad parent if she didn’t set aside as much as she could for her daughter’s education. The whole conversation got pretty emotional: it’s hard to argue with a parent wanting to do right by her child.

Better For A Child

The more I think about it, though, the more sense it makes to de-prioritize saving for your child’s college. I’m not suggesting cutting such savings entirely, but I don’t think it should top the list either. It can even be a benefit to your child.

Prioritizing paying down debt and saving for worthwhile goals sets a good example for your children. But there’s another lesson to be learned from a smaller college fund: your child will have to take responsibility for paying for their own expenses, whether they’re taking out student loans or working part time. My own college experience played out like this. I received only minimal help from my parents, as far as money went, while many of my classmates had every expense paid for. But because I had worked all through college, I had a whole stack of job opportunities the moment I graduated. Some of those students with a great cushion from their parents were still looking for work a year after graduation.

The fact of the matter is that a person doesn’t have to have a huge college fund in order to attend even expensive colleges. Student loans may not be a particularly comfortable burden, but they do provide a certain flexibility in allowing a wide variety of people to pay for a college education. There are also scholarships, grants and part-time jobs as alternative ways to pay for school. That’s not even taking other options, like the Peace Corps or starting at a community college, into consideration.

There’s nothing wrong with a parent choosing to take care of his or her own financial priorities before trying to fully fund a child’s college education. It’s a good goal, but shouldn’t take priority over insuring one’s own financial stability.

Popularity: 10% [?]

If you’re setting aside savings for a college fund, there are a few tax advantaged accounts that work similarly to retirement accounts. Deciding between them is a little more complicated than choosing between a 401(k) and an IRA, though. Both 529 College Savings Plans and Coverdell Education Savings Accounts can be attractive options for saving up for college — but which one is the best choice for you and your family? Before we can decide, we need to know a little more about our options.

Coverdell ESAs

The big benefit of using a Coverdell Education Savings Account to save for your child’s education is that you can use the money in the account for certain expenses you might encounter from kindergarten to 12th grade. You can start saving money up for educations far beyond just college as soon as your child is born. A Coverdell ESA is also a solid method for building up savings for college expenses. You (or anyone else) can contribute up to $2,000 each year into an investment trust, which grows tax free. As long as you’re using the money for qualified expenses, withdrawals are tax free. You won’t be able to contribute to a Coverdell ESA after the beneficiary — the student whose name is on the account — turns 18 and all funds in the account must be withdrawn before the beneficiary turns 30.

It is worth noting that some of the benefits of a Coverdell ESA may expire in 2010. Congress must act in order to preserve many of the benefits associated with Coverdell ESAs.

529 College Savings Plans

No matter what state you live in, you have access to some form of a 529 College Savings Plan — each state offers their own version. Some states rely primarily on 529 Prepaid Plans, which are less flexible, but you have the option of using another state’s plan if you so wish. With a 529 account, you have few limitations on how much you can contribute. Your contributions are invested, and — as long as withdrawals are used for tuition and educational expenses — your gains are not subject to taxes.

A key benefit of using a 529 plan is that it generally does not impact what financial aid your child is eligible for. You also can control account disbursements indefinitely — in general, a 529 plan remains in the name of a parent.

Which Plan?

When you’re considering what sort of savings account to use to fund your child’s education, the big question is whether you plan to use the same account to save for expenses for elementary school through high school. If so, it’s worth opening up a Coverdell ESA — along with a 529 College Savings Plan if you can go even a small amount over that $2,000 limit. But with the changes that may be coming to Coverdell ESAs, 529 College Savings Plans are the more flexible option. If Congress does not renew the features that make a Coverdell ESA so attractive, you’ll want to have you child’s college savings in a 529 account.

Popularity: 11% [?]

You would never turn down free stuff, right? A free meal? A free car? What about free money? Every day you choose not to save money, you’re turning down free cash.

Admittedly, a lot of this free money is down the road — it’s available in tax incentives or interest. But there are significant reasons to save money while you can.

Retirement Accounts

If your employer offers a 401(k) plan with any sort of matching, there is absolutely no reason not to invest in that plan. Any matched funds really are free money — that’s money your employer won’t give you in any other situation. Even better, any money that you contribute to your 401(k) plan doesn’t show up on your taxes. If you earn $50,000 next year, but deposit $3,000 in your retirement account, you’ll only pay income taxes on $47,000. Most other retirement plans, such as IRAs, also provide tax incentives for saving.

College Funds

If you have any children, there are a whole list of college savings options — and there are plenty of rewards for using them. A 529 plan, for instance, can reduce your state income tax bill in some states. Money deposited in a 529 also grows tax-deferred and tax-exempt money can be withdrawn for college expenses. Basically, that means that you can avoid paying taxes on the money you earned to send your kids to college. Other college savings plans offer a variety of incentives, and many of them make it easy for your children to also save as well. Every dollar that your child can save for college before the fact is a dollar he or she won’t have to pay interest on after graduation.

Health Savings Accounts

Health savings accounts have some major advantages, especially for people unable to obtain health insurance. That’s a pretty big chunk of the U.S. population, and if you’re included, you probably haven’t done too much planning for a health care emergency. An HSA, however, allows you to save money exclusively for the purpose of covering health expenses, from immunizations to surgeries, as long as you are enrolled in a high deductible health plan, which is fairly inexpensive. Deposits made to an HSA are tax-advantaged: depending on how you set it up, you can save either pre-tax or post-tax dollars. Either way, though, your taxes will go down.

Interest

While interest isn’t the coolest way to make money, it is steady. You’ll never get rich working a steady job, but if you can keep your money earning interest, it can build up surprisingly quickly. In fact, interest is one of the key methods for making retirement accounts and college funds worthwhile. Otherwise, I think most of us would keep our savings in a jar buried in the back yard (and off the books so that we could avoid taxes).

Popularity: 18% [?]