Should I lend money to my deadbeat in-laws?

As a member of the U.S. Navy, I am currently investing a small percentage of my wages into a TSP (thrift savings plan) account. I am 26 years old, currently married (wife is attending nursing school), and I have a 2-year-old son. What other types of investing would you suggest for an individual like myself? I feel that I am behind in getting this started. With my son growing up so fast, I am looking towards the future and him attending college.
-- Dennis S., Goose Creek, S.C.

First off, congratulations on getting started. Some people — especially financial advisers trying to sell you their products and services — tend to overcomplicate the process of saving for college or retirement. The hardest part isn’t so much deciding what to do with the money. The hardest part is saving the money — especially with a growing family.

The most important thing on the saving side is to make sure you take full advantage of any and all accounts that help you save faster. For civilians, this starts at work with either a 401(k) plan. For those in the military, the equivalent account is a thrift savings plan, or TSP, which also covers federal government employees. Before you start looking for alternatives, make sure you're taking maximum advantage of these accounts. That's because no other investment plan will supercharge your savings with matching contributions — for every dollar you kick in up to a limit, Uncle Sam (or your employer, usually) will give you another one. (Clarification: If you're in uniform, unfortunately, matching contributions are only available to some "critical specialities" designated by the secretary repsonsible for each service. )

For college savings, you may want to look into a so-called 529 account. These are offered by most states and give you tax breaks and other incentives for money used to pay for tuition and other college expenses. You can also set up an account in your child's name under the Uniform Gift to Minors Act (a so-called UGMA account) that taxes investments at the child's rate. (The downside is that when your child turns 18, they get control over the money.) One of our favorite sites for information on college savings is

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If you set up your own investment account, you'll probably want to start with managed funds (which pick stocks for you) or index funds (which have lower fees and just invest in all the stocks of a specific index, like the Standard & Poor's 500). Just like your TSP, the safer investments usually give you a lower return. So spread your savings around. Don't keep everything in stocks; put some money in bonds and maybe some in funds that invest overseas. There are a number of good Web sites out there to get you started. Companies like Fidelity and Charles Schwab that cater to small investors have lots of information and tools to learn more.

And while it doesn't hurt to start investing outside your TSP, so far this year the five managed funds you get to choose from under your plan have done pretty well. The Government Securities account, which invests in U.S. Treasuries, is up 3.7 percent so far this year; the Fixed Income account, which invests in other types of bonds, is up 4.2 percent; the Common Stock fund is ahead by 10.1 percent; the Small Cap fund — which invests in smaller, fast-growing companies — is up by 10.9 percent; and the International fund is up 13.8 percent.

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