Q: I am an 18-year-old college freshman. I have been fortunate enough to receive a very large sum of money in scholarships at my university, such that I have a surplus of a few thousand a semester. I am allowed to spend the money however I wish.

Rather than allowing the money to depreciate during my four years in college, I would like to invest it. I appreciate any investment advice you can offer a young person like me.

A: Congratulations! The best answer to your question requires a short lesson in what’s called “the life-cycle hypothesis,” the idea that won the late Franco Modigliani a Nobel Prize.

The idea is that we try to even out our consumption throughout our lives, attempting to avoid sharp drops by saving — first as a cushion and second to replace our earning power as we get older.

Basically, we try to replace our human capital (something you have a lot of because you are both young and smart) with financial capital during our work life.

Having some accessible savings, for instance, can help you make a good decision when you seek a job.

It may allow you to pursue opportunities that your highly indebted classmates won’t be able to pursue because they’re looking over their shoulders at major debt service. Having access to liquid savings will also make you a better (read stronger) salary negotiator.

Bottom line: For the near future, limit your risk and stay liquid. You might, for instance, consider one of the short-term inflation-protected Treasury securities exchange-traded funds, such as iShares 0-5 Year TIPS Bond (ticker: STIP).

Q: My mother-in-law is 93. When she was in her late 70s, her husband passed away and she decided to buy a long-term-care insurance policy. Her account is now worth $146,000.

She suffered a stroke three years ago, then developed fractures in her vertebrae. This year she has slipped to the point that she cannot take care of herself. My wife and her sister have been trying to get some of the money from the insurance to defray the care costs since May.

This company has put obstacle after obstacle in their way with delays and demands for paperwork. In the event they ever break the logjam, the maximum payout is $2,400 per month. In retrospect, she would have been much better off investing the money, so that when she needed it she could have control. I cannot imagine that we are the only ones going through this.

A: When the sale is being made, agents talk about prompt payment of claims. I’m hoping your experience is unusual.


Copyright 2013, Universal Press Syndicate