5 common mistakes in a bad economy

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.

What to do: paying for college
  • Complete and send in the FAFSA, even if the fall semester starts next week, to be considered for federal grants and loans for college.
  • Families with younger children should investigate college savings options including 529 plans.
  • Find plans administered by each state as well as track loan rates and calculate contributions to the plan at's College Finance page.
  • Sallie Mae's Web site offers a rewards program that allows consumers to contribute to 529 plans through everyday purchases.
  • Other college savings options include custodial trust accounts, in which a child owns the money but the account is controlled by a parent or guardian. Coverdell Education Savings Accounts may be used to pay for elementary and high school expenses a well a college.

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 given to education costs and what happens after graduation, such as paying back loans and what the student's income will be after school ends.

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.

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