Jan 9, 2010

Money in the Bank

My daughter wanted to know where to put her babysitting money until she's ready to use it for college expenses. She doesn't want to put it in her bank account, for several reasons.

1. Interest earnings on savings will be more than offset by inflation. If you don't believe me, you haven't bought a loaf of bread lately.

2. If the financial aid office knows she has a hundred dollars in her bank account, that's a hundred dollars less they'll award her in college aid. She needs that hundred to buy books. (I don't know about you, but I believe that $130 for an algebra book is beyond ridiculous. Can you say "Kickback?" Sure you can.)

While our grandmothers would have put the money in a mattress, we're a little more cautious here. I told her to buy precious metals, and put them in a safe deposit box. Gold is a hedge against inflation, and is poised for growth. Platinum, if you can get it, is 30 times more rare than gold. Good luck with that.

Silver is a good choice, if gold ($1190 for a one-ounce coin) is out of your budget. A one ounce American Eagle silver coin is about $22 right now.

The important thing is that she's hanging on to her earnings, investing it somewhere instead of spending it on clothes, music, and fast food. When she graduates from college with substantially less debt than her peers, she will have an easier row to hoe.

Wisdom is acting in such a way now, that you'll be happy with your choice later.

What wise choices will you make today?

Disclaimer: do not take my advice. Listen to your investment professional, not a blogger.

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