OPENING A MUTUAL FUND ACCOUNT

(1) Many funds reduce their minimums for an IRA (Individual Retirement Account). So if your grad has earned income during 2008, he or she can open an IRA, and thus be entitled to participate in a mutual fund for much less. For example, the Ariel Funds (http://www.arielinvestments.com/, 800-292-7435) which require a minimum of $1,000, drop that to just $250 for IRA accounts.

(2) Funds that offer an AIP (Automatic Investment Program) also lower their minimums, typically to $50. With an AIP, the mutual fund company automatically transfers the money from your bank account or paycheck into the fund once a month. The Ariel Funds' AIP minimum is $50 per month.

The T.Rowe Price family of funds calls its AIP the "Automatic Asset Builder" program. Like the Ariel Funds, the required monthly investment is $50. However, if your account has a balance of less than $5,000, it will be hit with a $10 fee once a year until the account reaches $5,000. These details are not spelled out on the Web site (http://www.troweprice.com/) so call 800-541-6066 to speak to a live person.

(3) If your grad does not wish to sign up for an AIP, he or she might consider the Nicholas Fund (http://www.nicholasfunds.com/, 800-544-6547). This growth fund has a standard minimum requirement of $500. There is no fee if you drop below $500 but the company asks that you bring it back up to $500 as soon as possible.

(Note: The funds mentioned above are all no-load and can be purchased directly from the companies.)

TWO SAVINGS ALTERNATIVES

4) Remind your grad that it takes only $1 to open a money market account at PayPal (http://www.paypal.com/). The current interest rate is 2.33%. The money is managed by Barclays Global Investors but is not federally insured. 

5) At ING Direct (http://www.ingdirect.com/) all accounts are federally insured up to $100,000 and there are no minimums. Among the choices:

• The all-electronic checking account is paying 1.75%; more if you have over $49,999.99 in your account!
• The basic savings account is paying 3.0%.
• The 6-, 9- and 12-month CDs are paying 3.30%.

Bottom line... Your grad now has no excuses not to save his money!

- Nancy Dunnan