Where to put college $$ (short-term)?

<p>My daughter's sophomore year is now paid for (insert dance of joy here), and from this point forward, we will be paying for college out of current earnings. It's doable (EFC about 10K), but with all the financial turmoil in the markets, our mutual funds are down quite a bit. Our 529 fund (MI) is fluctuating, but not wildly; it's certainly looking to be more stable than our mutual funds.</p>

<p>If I were saving the money for the long-term, I'd probably load our mutual funds, but since we'll be withdrawing funds in September, December, and March, this seems like a risky proposition. In previous years, I split our contributions almost evenly between our 529 and the mutual funds, but that was also relatively long-term.</p>

<p>I'm actually considering putting everything into our savings account to preserve our savings, and then move it all to our 529 in August (or sooner, if things calm down), which would still give us the tax benefit and yet keep our savings whole. At this point, I'd like earnings beyond the interest on our savings account, but the most important factor is preserving our initial "investment". </p>

<p>Any thoughts on a smart, but conservative, strategy for times like these?</p>

<p>I've been staggering CDs. 3 month, 6 month, 9 month. As each matures I either use the funds, or roll it over into the highest category (IE: 3 mo matures, I roll into a 9 mo). This way I am never more than 90 days away from any needed cash. The percentages at my credit union have been just ok this past year, averaging 4.5%, but far better than even a money market at this point, and no risk. </p>

<p>You can compare current rates here (and many other places):
Home</a> | BankingMyWay.com</p>

<p>wait a few years for my sweet tech startup to get off the ground, venture capital, profit</p>

<p>^ But isn't the interest on the CDs taxable if not in a 529? I'm frustrated with the MI 529 because it only allows you to move funds between investment options once per year.</p>

<p>^ So what if the interest is taxable. For a CD at 4.5%APR, $10,000, the interest is like, wow, $450, and the taxes state and fed at 33% will still net $300. </p>

<p>Possibly a 529 will work but if you want near safety chose a good bank CD. Always remember that interest is what is paid on loans, whether you receive or lend.
"just" a mom, has good advice. Which I should have taken in 2001 when everything was paid for. By 2002, college funds was deeply in the hole.</p>

<p>We kept it all in a savings account. We are such dinosaurs! But we never lost anything, either. Making it easier to sleep at night.</p>

<p>The internet savings accounts at Etrade and ING are providing interest rates that are comparable to cd's. Much better than regular savings accounts and they were beating my old money market. Check those out. They are still insured and electronic transfers are easy.</p>

<p>Agree with singersmom, Capital One also has a good interest rate and it is a regular account you can write checks off anytime or make transfers from...not a CD.
For funds saved and needed for tuition in the next 2 or 3 years, I moved from mutual funds to tax free muni bonds. Not as great an interest rate but more stable and with the tax free, it is worthwhile....</p>

<p>Nice thing about Capital One is that they will take a check, rather than having to put your bank info online to open an account (or add to the account)....Noticed a number of Capital One branch banks opening up in NJ the last few weeks as well.....I think they bought out another S & L.....</p>

<p>We put our cash for school money in a Vanguard money market account. Anything that you might need in two years should be in cash or cash equivalents. By the end of senior year in high school, we like to have the cash to pay the first two years of college. By the end of sophomore year in college, we like to have the cash to pay the last two years of college.</p>

<p>It's the only way I can sleep at night...</p>

<p>We also have all 4 years in cash at Vanguard money market fund. I've done research that Vanguard is the only money market funds that don't have CDO.</p>

<p>What is CDO?

[quote]
A CDO is a Collateralized Debt Obligation.</p>

<p>A CDO manager will buy debt (bonds and loans) from 50-200 issuers to use as the collateral. He then sells new bonds to investors, which have different payments and credit ratings, depending on the risk preference of the investors. </p>

<p>If one of the bonds in the portfolio defaults, then the loss is taken on the highest risk portion of the CDO.

[/quote]
</p>

<p>Depending on your tax bracket, you should also consider tax-free</a> Money Market funds that invest in high-quality, short term bonds in your state:</p>

<p>
[quote]
State tax-free funds, which invest in the municipal bonds of a single state. They’re also known as double- or triple-tax-frees: double- if free from federal and state taxes, and triple- if they’re exempt from federal, state, and local taxes.

[/quote]
</p>

<p>Here's a [calculator[/url</a>] to help you calculate your effective yield.</p>

<p>Before you invest, check out [url=<a href="http://www.morningstar.com%5DMorning"&gt;http://www.morningstar.com]Morning&lt;/a> Star](<a href="https://personal.vanguard.com/us/FundsTaxEquivForYield%5Dcalculator%5B/url"&gt;https://personal.vanguard.com/us/FundsTaxEquivForYield)'s recommendation for quality of management and fees when comparing funds.</p>

<p>For Ohio you have a few options:</p>

<p>[url=<a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0096&FundIntExt=INT%5DVanguard%5B/url"&gt;https://personal.vanguard.com/us/funds/snapshot?FundId=0096&FundIntExt=INT]Vanguard[/url&lt;/a&gt;] , [url=<a href="http://personal.fidelity.com/products/funds/mfl_frame.shtml?316203108%5DFidelity%5B/url"&gt;http://personal.fidelity.com/products/funds/mfl_frame.shtml?316203108]Fidelity[/url&lt;/a&gt;] and [url=<a href="https://www.touchstoneinvestments.com/home/fundinfo/fimm7.asp%5DTouchstone%5B/url"&gt;https://www.touchstoneinvestments.com/home/fundinfo/fimm7.asp]Touchstone[/url&lt;/a&gt;].&lt;/p>

<p>Actually...saw you're in Michigan...[url=<a href="http://content.members.fidelity.com/mfl/summary/0,,316201508,00.html%5DFidelity%5B/url"&gt;http://content.members.fidelity.com/mfl/summary/0,,316201508,00.html]Fidelity[/url&lt;/a&gt;] has one for your state.</p>