Placing funds for College

I recently received a modest inheritance ($40,000), which will support upcoming college costs.
My first daughter is entering college Fall 2006.
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Any thoughts on where to place the funds ?

I am thinking 1/3 money markets , 1/3 short term bond fund, and 1/3 a balanced fund (T Rowe Price Cap Appr / Oakmark Equity Income)

Does this make sense for my timeline ?

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Since your timeline is somewhat tight, you'll want to make sure that you keep a good portion of this liquid and at very little risk.

The allocation you're suggesting may work well in your situation. How much of this fund will you need in 2006?