Lynn Brenner Lynn Brenner

Brenner answers questions about all aspects of family finance.

My 12-year-old granddaughter lives with me and my husband. Her late father left her a modest life insurance benefit. She also gets Social Security benefits. My husband has control of these finances. Right now, this money is in a bank getting negligible interest. It's very important that we handle this money wisely, as this is all that will be available for her future. We are elderly and cannot provide more for her. I appreciate any advice you can give us.


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You are handling this money wisely, by keeping it safe.

Sometimes the best answer is the simplest, says Larry Elkin, a Scarsdale financial adviser. True, you can't get much return on money in the bank as long as the Federal Reserve keeps interest rates low to stimulate the economy. But alternatives like stock and higher-yielding bond funds carry substantial risk. Your husband is sensibly preserving your granddaughter's limited capital, thus leaving her with options when she's old enough to make her own choices, Elkin says. If she doesn't need this money sooner, in 10 or 20 years she'll still have plenty of time to invest in stocks for long-term growth.

Meanwhile, you can safely boost her return a little with a ladder of FDIC-insured Certificates of Deposit. "Laddering" means buying CDs of different maturities. Instead of putting all the money into one three-year CD, for example, you might divide it equally between five CDs with maturities ranging from three months to three years. (In today's extremely low-rate environment, short maturities make sense.) As each CD matures, you reinvest in a new CD. When rates are rising, you can reinvest at a higher rate. And if they fall, you still have some money locked into higher rates.

The bottom line When safety is your highest priority, an FDIC-insured account is the best option.

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