Best Places To Stash $$ During Downturn

Ray Martin On That, Mortgage Refinancing Wisdom, And Kids Saving For College

(CBS)  The worrisome economy weighs on everyone's mind these days.

With gas prices soaring, foreclosures going through the roof, and the high price of food, among other concerns, you don't have to go far to find someone who has money questions on his or her mind.

The Early Show sent a camera crew onto the streets of Manhattan to enable folks to ask questions of our financial guru, Ray Martin. He answered three of them on the show Saturday.

FIRST QUESTION: Besides under our mattress, where's the best place to put our money right now?!

ANSWER: This is obviously a common question nowadays. The safest? If you're employed, look closely at your company's 401(k) plan. These accounts are a safe amount of money in a trust. That means it's fully protected by the FDIC. Also, a lot of companies now have a 401(k) incentive plan - they match employee savings up to 50 percent, up to a set limit. That means if you put in $1,000, your company will put in $500. That's also good because, when you sign up for it, the money automatically comes out of your paycheck. No muss, no fuss.

If you're not employed or your company doesn't have a 401(k) plan, look into mutual funds, and the more conservative money market funds. They have higher yields than most savings accounts. Just make sure that, if you're going to invest with brokerage firms, you educate yourself about your options.

SECOND QUESTION: I have both a fixed rate mortgage loan and a home equity loan, and I'm wondering if now is a good time to roll those two together into one, fixed-rate vehicle, or should I ride with a fixed-rate and a variable-rate at the moment?

ANSWER: Martin assumed for his answer that the fixed-rate loan is bigger than the home equity loan. Bottom line: If you already have a home equity loan, chances are it's lower than the current home equity loan rate (6.75 percent). If you roll it together with a fixed rate loan, the interest will almost surely go up for both, as an adjustment to current rates.

So, right now probably isn't a good time to roll the two loans together. HOWEVER, the smartest course of action right now is to pay off that home equity loan as quickly as you can, because those rates will almost surely go up again, since the Fed is widely expected to boost rates in coming months.

THIRD QUESTION: What might my daughter be able to do herself to pay for college in the next few years?

ANSWER: It looks from the video as if the young lady is 14 or 15, and now is a GREAT time to start asking those questions, when she has some years to prepare. First of all, if you want your kids to help or cover their own college tuition, the first rule is summer jobs, summer jobs, summer jobs. Working is earning and earnings can be saved.

Another idea? Have her start looking at colleges NOW. Where does she want to go and how much will it cost? What activities and grades will help her be an attractive applicant to those schools?

Another good rule, high grades and good activities can equal a scholarship, which saves money. There are work-study programs at a lot of schools that can be tackled freshman year, OR you can take Advanced Placement (AP) college-level classes. Those courses give you college credit and, if you get enough of them, you can register in college as a sophomore and get the entire freshman year off your tuition bill. A year or two in federally-funded programs such as the Peace Corps or Americorps can give you money for college as well. Try community college or state school for two years. It doesn't matter where you start out, it matters where you graduate from, so take a look at all your options. And apply for financial aid as soon as possible!

[brianbwb-2009]

"... guess everybody their own ideas about where to put your money. For me it''''s bonds and stocks that pay dividends. But before you invest, DO YOUR HOMEWORK FIRST!!" Posted by pollroller1

Sound advice, but there is that little problem that all corporations lie to inflate the value of their stock, and the only information you have access to is what they have made public.

I am sure that at one time Enron seemed like a wise investment, how could the best, most complete homework have uncovered the BS that caused it to collapse? Same with banks now, they lied to the limits of their ability to lie, now the truth is catching up to them, same for the US economy as a whole.

[eddom949]

This inflation idea is a hot new concept. Free money from the government, no work, just a bailout, and to think, they signed the contract. The ever-changing dollar and what can it do for me... Home ownership, highest bidder, but at least there are people willing to work...

[sociald63]

dont bother - we are all gonna die poor - well, maybe except bill gates & trump

[spadeisspade]

tksk53-

CD''s? Are you serious? Their rates are based on the fed''s, which is at what...2.25% or something right now. I''d LOVE to know what bank you''re getting 5% cd''s, seriously! I shopped 4 banks in my area (thinking the same as you, that CD''s were at least a sure thing), and nothing over 3.5% Still better than a savings account, but not as good as 401k/IRA. And it does take a long time to make money with them, that''s why it''s an investment, not a scratch ticket.

[sociald63]

i disagree - just hand over the $$ and i will hide it for free :)

[pollroller1]

I guess everybody their own ideas about where to put your money. For me it''s bonds and stocks that pay dividends. But before you invest, DO YOUR HOMEWORK FIRST!!

[hotwitch]

This article gives the false impression that 401K''s are FDIC insured. That is simply not true, they may be depending on the investment vehicle, but in most cases are not. Check the prospectus.

This article should be titled "seriously lacking investment advice"

[howdydoody6]

How are people like me on a fixed income (I''m 70 yrs. old) supposed to ever make up my losses in the stock market when the cost of everything has skyrocketed, there is no end in sight and I was counting on that hard earned money that I invested over the years to help carry me through till I die. That pidally check that I get from social security and my pension raises will never equal the amount that I have lost. Any suggestions?? Posted by Howdydoody 6 at 9:48PM Jul 26

[wardoglrs]

BUT: What they don''t talk about here is the amount of inflation and the cost of living Give me a break Ray Martin. Your an idiot how the hell can you expect anyone to save when a summertime job is given to an Illegal.

How about this RAY the inflation rate @ 10 to 12 % verse the value of the dollar is Eaton up along with taxes at 30 plus percent.

In other words you moron a child cant win
there are to many things that are needed for school
like books room and board and we haven''t even got into the class room yet..What a moron.

Put your money in a 401 Good lord again the inflation rate takes all and plus the tax.
The only ******* way an American can get by is to shut down the IRS and replace it with nothing so people can buy food pay for items like housing energy. Hope she doesn''t get pregnant buy drugs go party with friend''s a on the weekends. Go skiing or hiking.

[wardoglrs]

People got to wake the hell up and see that your money is worthless the Feds just print the dam stuff you had to at one time earn your money digging for it you know like Gold & Silver. So the reason you cant keep up with the Joneses I mean the Feds is cause they bail out there banks and charge you for it with you labor.

Then the fricken morons in congress subsidizes there buddies and hand out dollars to other countries that the tax payer pays for unknown to them.

Veto any bill in the white house and it just goes to the Military Industrial Complex every time, Most tax payers are unaware of this to.

If American people understood money this would be the most prosperous country on earth like it used to be until the Feds stole it with lies.

[marshall_nee]

I bet that this guy is long on gold.

[tksk53]

TO RAY MARTIN - THE WRITER OF THIS ARTICLE
401K''S Good place to put your money - Yes if the things that it is invested in don''t drop faster than you are putting it in.
Most 401''S are down from 10% to 30% right now
Takes a long time to make that back
Best place right now is in a CD. And some are paying right at 5%.Put it in short term and watch the market.
But don''t take anything out of your employer funded IRA
TKSK53