By Scott Burns

Q. I just came into tens of thousands of dollars that I plan to safely invest. When do you anticipate that bank interest rates on CDs will begin to rise? —M.P., Nashville, TN

A. If this were a rational world, they would have started rising long ago since inflation is now substantially higher than interest rates. Stockpiling cans of soup is a better investment than a CD at current CD yields.

Trying to guess the future of interest rates has always been a great way to renew humility. Whenever I think interest rates can’t possibly go lower, they drop again. More important, my 30 years of searching for good fortunetellers has yet to produce results. The future is a great equalizer.

Rather than think about CDs, I suggest you start learning about how much risk you can tolerate. The average 5-year jumbo CD is now yielding about 1.25 percent according to www.bankrate.com. So you could invest only 35 percent of your money in the SPDR S&P Dividend Index exchange traded fund and keep 65 percent of your money in riskless, no-yield cash and have the same yield as putting all your money in a 5-year jumbo CD. What are the odds any emergency would require you to spend 65 percent of your money and force you to sell the 35 percent you have in stocks? This fund is currently yielding 3.56 percent has the ticker: SDY and has an annual expense ratio of 0.35 percent.

With yields on virtually all “safe” investments currently lower than the 12-month inflation rate this is a good time to rethink what risk means to you. According to the Department of Labor inflation was running at an impressive 3.9 percent rate in the 12 months ending in September. That means “safe” investors are losing significant purchasing power every year.

Q. I currently have 529’s for both of my children. My daughter is 9 and her 529 is valued at $24,000. My son is 6 and has about $9,000 in his present 529. Both are lifecycle balanced for age. My thought is to transfer these to the Texas Tuition Promise Fund which locks in today’s tuition rates. In my present 529’s, I would have to have investment returns equal to that of the rate of tuition inflation of 6 percent to 8 percent. Am I wrong to think investing in this fund is like getting a 6 percent to 8 percent rate of return? Is it possible that I am buying into a tuition bubble as college tuition outpaces incomes much like the housing market? —J.K., Dallas, TX

A. College tuition has been in a bubble for more than 50 years. During most of those 50 years states, including Texas, were in better fiscal condition than they are today. So it is likely that tuition costs in Texas and elsewhere will continue to rise at rates that are higher than inflation. Whether they will rise at 6 to 8 percent a year is another question. Tuition may also rise at higher rates than you can expect to earn on your savings for college education unless you take very large risks. So what you are thinking of doing is a good and conservative choice.

There are some downsides you should consider. First, this commits your kids to attending a school in the Texas system. This means you would be foreclosing your amazing opportunity to send about $40,000 to Stanford or Harvard for each year’s tuition. Second, it is not always possible for a student to graduate in the standard four-year credit hour count. This is because of scheduling difficulties, not because all students become slackers. It is possible that cuts at public colleges in Texas and elsewhere will result in more students needing more credit hours to complete department and degree requirements. College students have also been known to change their majors, requiring more credit hours. Either way, prepaid tuition students may find this is a bit like discovering those precious airline miles won’t get as many round-trips as your favorite airline advertises.

Grumbling aside, it remains that a college education— one unencumbered by the burden of student loans— is about the best thing you can do to help your kids adapt and survive in a difficult economy.