Your money

Little Steps Can Add Up To Big Savings At The Pump

Everyone is looking for ways to reduce "gas pains" from high fuel costs. There are some easy things you can do to put yourself on the road to gas economy.

• Light on the Pedal-Ease on the accelerator when you start from a red light. Your car will run leaner and won't use as much gas. On the highway, run about five miles under the posted speed limit to save.

• Crank the A/C-It used to be true that not using the air-conditioning (A/C) in warmer months would save on fuel economy. That's not true anymore. With the aerodynamics of today's vehicles, by turning off the A/C the resistance created by the wind causes more drag on the vehicle when the windows are rolled down.

• Use the Right Fuel-Never use a higher octane gasoline than your engine needs. It's like trying to put 16 ounces of fluid into a 12 ounce glass. Use the right octane and you can save about a dime or more per gallon at each fill-up.

• Keep Up the Pressure-Make sure you have the correct pressure in each of your tires. With too little air in the tires, the friction that it takes to roll the car is much greater, thus reducing fuel economy.

• Keep It Clean-Keep your engine clean of debris by changing its oil and fuel filter.

• Get It In Gear-Most modern transmissions are electronically operated by controllers. Transmission fluid that's broken down may keep your car from going into its highest gear. Have the transmission fluid changed in the 36,000 to 50,000 mile range.

• Stir It Up-There are lots of different gadgets on the market that claim to increase fuel economy. In all of our testing, we have virtually found no improvement in anything, with one exception. It is a device called Tornado that's put into the air intake, closest to the throttle plate, and stimulates the air to get it really turbulent. That causes a good fuel atomization within the engine itself that caused an increase in fuel economy in the applications we tested by an average of one to two miles per gallon.

With gas prices over $2 and approaching the $3 mark, if you can save one or two miles per gallon every time you fill up, that can translate to about $300 or $400 of savings per year under normal driving conditions. I think everybody's interested in that.

Navigating the College Savings Programs

As a parent, the big financial concern with a newborn is how to set aside enough money to assist for a college education. Universities and state governments have developed many different financial savings plans to encourage parents to save money for college. Some of the plans include 529 accounts, Coverdell accounts, Roth IRAs and prepaid/guaranteed tuition costs. Unfortunately, few of the programs offer every benefit such as tax deductions, tax deferred savings, unlimited investment options, self directed investments and no penalties.

Selecting a university is a critical and expensive decision, and in my view it is foolhardy to make before the last couple years of high school. A drawback of the university-based or state-based plans (such as a 529 account) is that they impose penalties if a child doesn’t attend a specific university or in a specific state. Who knows what aptitudes, skills or interests your child may develop that necessitate a specific school that is out of your home state. University and state-based plans also impose penalties if the money isn’t ultimately used for qualified college expenses; another example where an event that is out of your control and may cause an unneeded expense. But the biggest problem with university and state programs are the financial rule changes they make – after you start the plan.

To me, the university and state-based programs are a lose/lose savings plan for parents. If the cost of tuition rises faster than forecasted, in spite their guarantees, they raise the price and leave you under-funded. Conversely, if tuition rises less than forecasted, then you end up overpaying for tuition. And the same applies to the stock market some plans force you to invest in; when the market fell in 2000 and 2001, many plans broke their promise to guarantee full tuition funding in spite of promises to the contrary.

Another drawback of state-based plans is that your investment options are severely limited to a few mutual funds run by the brokerage firm operating the account. I have evaluated several: and they have high fees and poor returns, and I’m wary of the lack of competition for many of these accounts. The brokerage firms blame economics for the lack of investment choices, saying that most of the accounts are small and not very profitable for them, so they want as little trading and customer interaction as possible.

The federal college savings plans are better because they allow the widest selection of investments (such as an educational Roth IRA or other education savings accounts), and can be applied to most any accredited university. These accounts offer tax-free growth and withdrawal is also exempt from federal taxes and some states taxes. Realistically, your situation may call for multiple accounts. Rules prohibit you from using these if your income passes certain thresholds.

In my opinion, the best place to start saving college is with U.S. government ibonds from These bonds offer the most flexibility and control, and require none of the paperwork and rules of other savings plans. They accrue a decent rate of interest every month, the principal is adjusted for inflation each quarter, the income tax is deferred, and you don’t have any brokerage fees. And when the money is withdrawn for a university on their approved list, the money can be redeemed tax-free. (As for limiting rules: you cannot withdraw the money in the first year, and if you withdraw it within five years, there is a three month interest penalty – so ibonds are not the best savings plan after a child reaches about age twelve). Since ibonds are simply savings not an educational account, the money can be spent for any type of expense that may arise.

The government and brokerage firms keep updating these accounts, so my complaints will hopefully become moot in the near future. But the criteria that you need to watch for are: many investment options, few penalties, no taxes and total control. These will maximize the money you’re setting aside for that expensive degree.