If this latest economic slump has taught us anything, it’s that you damn well better be conservative with money you’re going to need in the future.  That means money you’re saving for a house, a car, your kids college, and in many cases retirement, better not be rolling in the stock market.

It’s along those lines that I’ve decided not to create a 529 college savings plan for my son.  I can’t afford it.

It’s not that I can’t afford the fees or the up front costs, for those are a drop in the bucket compared to what college will cost in 18 years.  It’s that I can’t afford to have his college fund washed away in a market that can’t be trusted.

I value his education too much, and while he doesn’t know it now, he will value it too.

I was very fortunate that my parents could afford to send me to college (in-state worked out just fine, thank you) and graduated with no debt.  I was fortunate to marry a girl that had the same benefit, and even more lucky that we are able to stay that way (minus a home loan).  So it’s with that experience that I try to create the same for my kid(s).

Wrapping that opportunity into the market is something I’ve declined to do.  For those who have trusted their investment strategy to handle their kids future in this economic environment are now fretting about it.  For those with kids graduating from high school, there’s more than fretting going on.

Some data to back up my position:

There are over 3,500 options for college plans out there, and 93% of them fell in value over the last 12 months.  Nearly 1,100 fell by 40% or more.

The way that some states have handled portfolios leaves one to believe that they can’t be trusted to manage your money (shocker, I know).

Last April, Oregon doubled the stock exposure in its “1-3 Years to College” portfolio to 40%. In 2004, an in-college student in Rhode Island’s aggressive age-based portfolio would have had 40% stocks, 31% bonds and 29% cash. By 2008, the equivalent was 40% stocks (including real estate), 55% bonds and a measly 5% cash.

Other plans took too much risk all along. In Utah, college enrollees could have 65% in stocks. Several states, including Maine and New Mexico, offered 529 portfolios with no allocation to cash for students over the age of 18. Even after North Carolina finally scaled back its risk earlier this month, a college sophomore can still have 43% in stocks, real estate and junk bonds.

Says Mercer Bullard, a securities-law professor at the University of Mississippi: “In some states, the asset allocation for the 16- to 18-year-olds looks as if it was designed by the 5-year-olds.” -Source

You see, many 529 plans are designed like many date-based retirement plans are: the older your kid, the more conservative the portfolio.  But that’s not the way many have been run, and unless you pay attention to where your money is, you wouldn’t have the slightest idea your portfolio is wilting.

Conservative Alternatives

Too many people got caught up in unrealistic returns from the market, and thought that it’s the only place to invest.  They’re paying the price now,  and a 3% return on a guaranteed CD looks pretty attractive.

Ditch the “get-rich-quick” mentality, and set up a structured CD ladder, or if you’re willing to ditch the guarantee, go with tax-exempt savings bonds.

The same goes for retirement.  If you are set to retire, you have absolutely no business having more than 10-20% of your money in stocks.

Based on the number of hands our government has in the free market “trying to do the right thing”, can you trust your kids future to government manipulation?  I think not.

Heck you can’t even trust them with your own.

Finance, Saving 529 Savings Plans, college savings, Investing, savings

Yesterday I called up AT&T and asked them to disconnect my second phone line that was a dedicated fax line.  Over the past year I think I’ve sent one fax, and naturally that can’t justify the $26 per month cost to maintain the line.

I’m not at a point where I’m trying to cut expenses, but it’s as good a time as any since no ones job is really secure.

So I disconnected the fax line, but left my main phone line intact.  For some reason I like having the old copper, twisted pair line running to the house.

Some people have gone strictly wireless, and for good reason.  But I like the ability to give out my home phone number on applications and when filling out forms that “require” a phone number.  It’s much easier to let the answering machine screen my calls than get bugged in the middle of the day by my credit card company with the latest and greatest offer for its best customers.

One good outcome of disconnecting my fax line was that the customer service representative at AT&T was able ot convert my main phone line to a more basic program that cost $4 less per month, but gave me features I didn’t have; namely caller ID and call waiting.

To be honest, I could care less about caller ID and call waiting.  I’ve never had either of them in my life, and considering how much we use the land line, I probably won’t get much value out of them.  I will however get the $4 per month value out of the new program, and that part I like.

So I’m still wired, and not willing to give up the “old style” land line, but I’m also not spending money on service I don’t use.

What are you doing to save money these days?

Frugal Living, Saving AT&T, fax machine, phone service

Dollar Savings Direct has dropped their online interest rate to 3.20% from 3.5%, and I suspect the trend will continue.

Dollar Savings, a spin off from Emigrant Bank much like Emigrant Direct, is still an online leader for interest rates, but for those of us who are trying to maximize the insured return on cash, it is frustrating to watch the interest rate continue to dwindle away.

Finance, Saving Dollar Savings Direct, Emigrant Direct, interest rates, online savings