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College Savings Methods By Marjolijn Bijlefeld For parents with a short time frame the best advice is to concentrate primarily on safety. Investments designed for safety include certificates of deposit, which are government insured up to $100,000. They generally pay a higher rate of return than a passbook savings account, the most basic of saving vehicles, but there are also penalties for every withdrawal. Money market deposit accounts, insured up to $100,000 by the FDIC, are another safe haven. They are a combination of a savings and checking account but require a minimum balance. These accounts routinely pay higher interest than regular savings and checking accounts and offer check-writing capabilities. Savings bonds, often considered a simple savings vehicle, have become more complicated as the government continues to change the rules. In May 1995, Congress did away with the 4% flat rate the bonds earned during their first five years and also did away with the guarantee that the bonds would earn no less than 4% during those years. So the old rule that you shouldn't buy U.S. savings bonds unless you intend to hold them for five years or more no longer applies. Now the long-term rate, or look-back rate, is no longer applied retroactively to the entire holding period for bonds purchased on or after May 1, 1995. You can buy and redeem series EE savings bonds at most banks. For current rates, which change every May 1 and November 1, call 1-800-427-2663. A mutual fund is a simple way to invest in a diverse group of stocks, bonds, or other securities. Mutual fund shareholders basically are pooling their money with thousands of other shareholders in that fund to reap the rewards of diversity without having to buy huge sums in a portfolio of individual stocks. Safest and least expensive are the no-load mutual funds, which do not charge for purchasing or selling their shares. Load funds can charge commissions as high as 8.5%, and both kinds of funds charge an annual management fee. Internet enthusiasts can find lots of information online about mutual funds. Other saving and investment tools include whole life insurance policies, borrowing from a pension fund or 401(k), or taking out a home equity loan. Source: Teen Guide to Personal Financial Management