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Ask Money

Cash in college savings

Chris Farrell Nov 18, 2009

Question: Our oldest son is a junior in high school. We had been saving for college in a mutual fund. When the downturn hit last fall, we stopped adding to the mutual fund, and put our monthly contributions into a CD that can receive automatic monthly additions at 3.75%.

The mutual fund has recovered some ground since its low point. When should we start moving money out of the mutual fund and into something more stable? We could get a 2.5% CD at our credit union now. Thanks for your advice! Evelyn, MN

Answer: You really don’t have much time before your son goes off to college. (I know this the hard way. I have a senior in high school and the time just flew by.) So, I would focus on taking advantage of market rallies to opportunistically lock in the value of your savings with FDIC insured CDs and the like (or their credit union equivalents).

You do have some time in a financial sense. It’s six years between now and graduation from college. Still, I would lean on the conservative side with this money. You’ll be writing tuition, room and board checks before you know it and you don’t want to see your savings vaporize in another bear market.

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