5 common mistakes in a bad economy |
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The federal government uses the information on the form to determine an applicant's eligibility for Pell grants, subsidized
Stafford loans and other financial aid, she says. Private organizations often use the information when awarding scholarships.
The survey also found that only 9 percent of the 1,404 families questioned reported using a 529 savings plan, a state-sponsored
investment account that accumulates tax-free earnings. Those with a 529 plan used up to $8,000 toward last year's education costs, which on the
average were $14,628, according to the survey.
Meanwhile, 38 percent of the families surveyed paid for tuition, room and board, and all other college-related expenses with
personal income.
Christel says that parents are so committed to sending
children to college, seeing it as an investment in their family's
future, that they often give little thought to education costs and
what happens after graduation, such as paying back loans and what
the student's income will be after school ends.
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| What to do: paying for college |
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4. Investing inertia
Long-term investing used to be easier: Pop the cash into the mutual funds and annuities and watch the returns rise like bread in an oven. But
even consumers with a little dough are prone to avoiding the complex implications that the volatile stock market may have for their investments.
Lyle Benson, who owns a financial services firm in Baltimore, says that investors can get lulled into complacency when they
should be reviewing their asset allocations to make sure they are keeping up with earnings targets.
While a portfolio should always have some amount of stocks to ensure growth in the long run, keeping too many stocks during a
down market can be costly, Benson says. Sheltering cash in treasury bills or bonds can help a portfolio hold up in a bear market.
Older investors are often attracted to the low risk of CDs, especially since some analysts are projecting rates will increase in
the coming months.
Benson advises investors to avoid locking in large amounts cash for periods longer than a year. An investor hasn't gained anything
if living expenses increase 4 percent or 5 percent, and the deposit is locked in at 3.5 percent, he says. Depositing in new CDs every six months
to a year will allow for rate changes.
"The idea is to have money coming due each year," Benson says.
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| What to do: investing inertia |
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Meet with a financial planner at least twice a year to review asset allocations in your portfolio to continue working toward investment targets. |
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Investigate investment options in bonds or treasury bills. |
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Deposit in short-term CDs or consider building a CD ladder. |
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