Mutual funds may be in for some more competition from bank products. That's right, boring CDs are reportedly attracting college savings plan investors.
The Wall Street Journal's Fund Track
column reported on the trend that has states mulling over whether to follow in the footsteps of Ohio, which added a bank certificate of deposit account in September. Savers like the CDs, reports the WSJ, because they care FDIC insurance, something mutual funds cannot offer.
Among the states adding CDs in 2006 is Missouri. "We saw it as a logical way to increase consumer options," said Mark Hughes
, director of policy and communications for the Missouri State Treasurer.
The paper added that more states may add the option, but did not name them.
, executive director of the Ohio Tuition Trust Authority and the head of the College Savings Plan Network, said that the CD option is pulling in cash that was sitting on the sidelines in savings accounts.
"The first obstacle is getting them in the door," he explained.
The CDs in the plan are provided by Fifth Third Bancorp
and cover maturities ranging from three months to 12 years.
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