If you’re like most parents, saving for college is your #1 financial goal—even ahead of saving for your own retirement. Many people, however, are putting money into ultra-conservative, low-return investment vehicles that may not be keeping pace with inflation. Does anyone know the average interest rate on a bank savings account? (pause to wait for responses) As of September, 2000, about 1%.* That’s less than inflation, and well below the 7% rate of education inflation we saw in the last slide. Yet that’s exactly where more than half of the parents who are saving for college are putting at least some of their money.
What about Savings Bonds? (pause to wait for responses) As of September, the average Series EE 5-year Savings Bond earned just 5.73%.*
And CDs? (pause to wait for responses) As of September, the average 5-year CD yielded 6.25%.*
While these investments are generally guaranteed against loss of principal, we can see that the returns are probably not enough to help you reach your college savings goals. So what are your alternatives?
