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Best Places To Stash $$ During Downturn

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!

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