(MONEY Magazine) – As New York City schools go, Walton High, in the polyglot borough of the Bronx, is neither the best nor the worst. Only 9% of its 3,500 mostly black and Hispanic students quit before graduation, compared with a citywide dropout rate of 26%. Some of the students use drugs, but the crack vendors don't deal openly on the schoolhouse steps, as they do elsewhere. And any violence, teachers find, is usually factional, not interracial: native-born blacks hustling Haitians or West Indians, for example, or Puerto Ricans battling Dominicans. There are also occasional flare-ups between the sexes, as science teacher Fred Plotnick, 44, discovered one afternoon when he stopped a boy and girl from fighting only to be rewarded with a swift pop in the jaw. ''It was the girl who clipped me,'' he recalls. ''And she had one mean uppercut.'' Still, the husky-voiced Plotnick, a Bronx native with a borscht-belt comic's fondness for one-liners, is content with his calling and proud of his nine years at Walton. ''Most of these kids are good,'' he says, ''and quite a few go on to college. Usually it's open-admissions schools, but some have won scholarships to private universities. Working with my classes is the only career I want.'' The one problem with Fred Plotnick's career is its low pay: $37,000 a year. That is 32% more than teachers' national average of $28,031, but the advantage fades in a city where living costs run 27.6% above the norm. Furthermore, the money must stretch to take care of his wife Veronica, 38, a homemaker, and the couple's two sons, Daniel, 7, and Brian, 4. Plotnick also puts out $2,400 in yearly support for Michelle, an 18-year-old daughter by an earlier marriage. Though the girl lives on Long Island with her remarried mother, Plotnick will pay until Michelle turns 21. Meeting these obligations has forced Plotnick into the ranks of the 60% of New York City teachers who hold second jobs: by teaching summer school at William H. Taft High in the Bronx, he bumps his annual income to $41,000. Even so, the Plotnicks live from paycheck to paycheck, saving virtually nothing and covering emergencies with loans from relatives. Says Fred: ''We get a $3,000 tax refund and we're a little bit ahead. Then we pay some bills and take a week's vacation on Cape Cod and we're back to broke.'' Nor will his earnings rise enough in the future to ease the cash crunch. A union member (annual dues: $446), as are 80% of the nation's teachers, Plotnick works under a contract that the United Federation of Teachers renegotiates with the city every three years. But aside from annual cost-of-living increases of 5% or so, he can currently count on only four other raises before he retires: $2,190 later this year, his 10th in the school system, and another $3,717 total between now and 1998.

One blessing is the modest (by New York standards) $510 monthly cost of the family's two-bedroom high-rise apartment. They live in the Bronx's Co-op City, a vast (pop. 55,000), government-subsidized development for middle-income tenants that boasts many of its own municipal services, from a firehouse to schools (not including Walton -- it's a few miles away). Both Plotnicks are into community activities: he is chairman of Cub Scout Pack No. 553, she sings in a chorus and volunteers at a nursing home. But in a year or two, after her younger son is in first grade, Veronica will seek work as a paraprofessional at one of the Co-op City schools. She could train on the job, and the 30-hour workweek would allow ample time with her family -- a condition she insists on. Paras now start at $11,700 a year and get raises over time to reach $16,570. The Plotnicks have already earmarked this second income for their sons' college education. They realized the urgency of their problem earlier this year when Plotnick's daughter Michelle got into Columbia University in Manhattan where the annual tab for tuition, room, board and expenses runs about $19,300 (partly defrayed for Michelle by an $11,500 scholarship). While Plotnick is not responsible for this bill, the shock persuaded the couple to open passbook savings accounts in the boys' names, using $1,000 in Christmas and Hanukkah gifts. ''They get both, since I'm Catholic and Fred is Jewish,'' Veronica explains. But finding ways to build the accounts has the couple stumped. The Plotnicks always put up with their tight budget in the past, but recently they have been looking for ways to squeeze out some savings. Vaguely aware too that the boys' money might earn more in better investments, they wonder which alternatives offer safety as well as high returns. ''Teachers are too poor to know about such matters,'' says Plotnick. ''Occasionally in the teachers' lounge at school someone mentions stocks, but it's just something he heard on the subway or from his Uncle Harry.'' Feeling frustrated by his financial ignorance, he complains, ''I tell my students college is for everyone, yet I don't know how to raise the money to get my own kids there.'' Plotnick himself went through St. Lawrence University in Canton, N.Y. on a combination of scholarships, summer jobs and support from his late father, a bookkeeper. Student loans helped him earn a master's in biology at the Albert Einstein College of Medicine in the Bronx, but he shunned teaching at first -- ''everyone said the money wasn't there,'' he recalls -- and took a job selling hearing aids. It was only three years later that the pedagogic urge won out, and he took his certification training at Herbert Lehman College in the Bronx in 1975. Meanwhile, New York's fiscal crisis erupted, causing 18,000 teachers to be laid off and preventing any new ones from being hired. Not until January 1978 did Plotnick join the school system. His starting pay was around $10,000 and his first experience was pure blackboard jungle. Assigned to a Bronx high school to finish the last week of classes for a woman who had abruptly quit, he walked into a roomful of obstreperous kids who warned him, ''We drove her outta here, and we can do the same to you.'' It was a tumultuous week, but Fred stood his ground, steeled partly by his determination to make it in his chosen career and partly by a desire to achieve enough financial stability to marry Veronica Ross, a divorced woman he had only recently met even though they grew up near each other in the Bronx. The daughter of a phone company splicer, Veronica had earned a degree in sociology at Lehman College in 1972 but was working as an office assistant at a telecommunications equipment firm. The couple married in May 1978 and began saving what they could of her $9,100 salary. Things got tighter three years later when their first child was born. But in those days Fred was benefiting from a contractual formula that raises teachers' salaries at a faster rate during their first eight years. His pay had reached $17,900, and he was tenured. The Plotnicks agreed that Veronica could quit work to be a full-time mother. By the time their second son Brian was born, Plotnick had decided to take out as much insurance as he could afford. ''I can't offer Veronica and the kids an estate built from savings,'' he reasons, ''so I'm creating one through insurance.'' Though he automatically gets a decreasing term group policy with a death benefit of $100,000 through his union, he pays $508 a year for an additional $125,000 in decreasing term. Another $76 buys Veronica's $30,000 death benefit -- ''just enough to toss me in the river,'' she quips. Plotnick has also added to the small disability benefit provided by the union. That guarantees him a mere $200 a week minus Social Security for 28 weeks maximum. So he pays $476 annually for a group policy benefit of $1,200 in monthly income to age 65. One reason for beefing up the disability insurance: the terrifying number of assaults on teachers. In a 1987 poll of the profession's largest union, the 1.9-million-member National Education Association, some 4% of teachers said they had been attacked at school at some point in their careers. And the union charged that this and other published figures are too low because school boards discourage teachers from reporting the incidents. Plotnick has already weathered a couple of confrontations -- one student threatened to throw him downstairs, another held a pistol to his head. ''It turned out to be a toy,'' says Plotnick, ''and after I reported him to the dean, the kid complained that I didn't have a sense of humor.'' But in a system where 1,960 real weapons were found on students during the past school year alone, he counts himself lucky. Despite its skimpy insurance coverage, Plotnick's benefits package does include a pension of 56% of his final compensation, collectible at age 62. He contributes 3% of his salary to the pension. And though he cannot borrow against that money, he can get it refunded should he leave the system before he retires. For a time, Plotnick also managed to launch an Individual Retirement Account that currently holds $3,500 invested in Dreyfus' Ginnie Mae Fund, recently earning 8.15%. He would now like to beef up his nest egg by contributing to a tax-deferred annuity as well, ''but that will have to wait until Veronica gets a job,'' he says. One reason Veronica stayed at home was to work with the two boys in her own version of a Head Start program, teaching them to read and paint and helping Daniel with his homework. Strapped as they are, the Plotnicks have still scraped together $100 a month for the past year to pay preschool tuition for Brian. That expense will end this fall, when Brian enters kindergarten and starts receiving what his parents hope will be a quality education from New York City's public schools. ''Truthfully, not all the schools are that great,'' admits Plotnick. ''But there are special classes for the best students, and if our kids are bright enough, they'll get into them.'' Then will come college, and more bills. Plotnick doesn't like to think about that, though. ''If I do,'' he jokes, putting an arm around Veronica, ''I get nervous around our apartment windows. Since my insurance makes me worth more dead than alive, she may decide a quick shove is the easiest way to finance a couple of B.A.s.''

BOX: Bottom Line

Last year the engine in the Plotnicks' 1985 Ford caught fire while Fred was driving. Though he got out uninjured (''Now I know what it's like in the hot seat''), the car was a total loss. The insurer, Geico, paid for a replacement, which is listed below as part of his car expenses. Income and outgo for the 12 months that ended June 30:

INCOME Fred Plotnick's earnings $41,370 Car insurance payoff 4,600 Tax refunds 2,987

Total $48,957

OUTGO Taxes $12,681 Car expenses 6,300 Housing 6,120 Food 5,200 Child-support payments 2,400 Miscellaneous 2,095 Clothes 1,689 Medical expenses 1,600 Entertainment 1,560 Child care and tuition 1,500 Pension payments 1,227 Contributions, union dues 1,176 Furniture 1,000 Gifts 1,000 Vacation 1,000 Student loan repayments 696 Telephone 600 Life insurance 584 ! Disability insurance 476 Homeowners insurance 53 Total $48,957

ASSETS Personal property $5,000 '85 Ford Escort 4,600 Individual Retirement Account 3,500 Checking account 1,700 Total $14,800

LIABILITIES Student loan balance $300 Charge account balance 100 Total $400

NET WORTH $14,400

BOX: The Advice Provide for emergencies first

-- THE PROBLEMS How to budget for savings and invest those savings to meet future college costs

-- THE SOLUTIONS 1. Reduce your withholding. 2. Set up a family emergency fund. 3. Buy zero-coupon bonds.

MONEY asked Joel Isaacson, a certified public accountant in New York City, and Donald Zoch, a Fairfield, N.J. certified financial planner, to meet with the Plotnicks. The couple brought their income/outgo statement and tax returns (''I feel like I'm running for office. How many politicians could come this clean?'' joked Fred.) After reviewing the data, the advisers offered these suggestions: Create savings. In September, when their son Brian is out of preschool and Fred's student loan is paid off, the Plotnicks will have some $200 a month to put aside. Fred can double that amount by having his school's payroll department lower the tax being withheld from his checks. He will lose the annual refunds that the Plotnicks have relied on to cover big expenses in the past. But adding the money to their cash flow over the year will allow them to invest it for interest -- which it does not earn while the government holds it.

Invest the savings. Before putting anything into their sons' college accounts, the Plotnicks must build a reserve so they can cope with a financial crisis. Zoch thought a realistic short-term goal would be $5,000, but Isaacson argued for $10,000 -- enough to cover expenses for four months. The cash should be stashed in a money-market fund for accessibility, and the advisers recommended Dreyfus Liquid Assets (recent return: 6.65%), since Fred is familiar with Dreyfus through his IRA. The couple need not wait, however, to switch their sons' passbook savings into higher-return investments. They can start now, using the money in each , boy's account to buy zero-coupon bonds -- securities purchasable for a fraction of their face value at maturity (see Investing Basics on page 151). As little as $388 will buy a Treasury-backed zero paying 9% that can be redeemed for $1,000 in 11 years, when the Plotnicks' oldest son Daniel will be entering college. And since the accounts will be in the boys' names, they can accrue up to $500 a year in interest tax-free. While the Plotnicks can further bolster their sons' savings when Veronica returns to work, at least $2,000 of her yearly earnings should go into the family reserves as well. That would free enough of Fred's income to enable him to contribute to the tax-deferred annuity that he is eligible for at work. He can put as much as 20% of his salary in it, making it a better vehicle for saving a nest egg than his IRA -- which limits yearly contributions to $2,000. And the couple will need the annuity's tax shelter, since Veronica's income will push them into the 28% bracket. But considering that she is still at home, the advisers thought that Fred should raise his $225,000 life insurance coverage to $250,000. For the present, he could do so at no additional expense, because his $508 yearly premium for $125,000 of decreasing term insurance could buy $150,000 in straight term insurance (his premium will rise later as he ages). In shopping for a new policy, he should compare savings bank life insurance with products from private insurers: on average, New York State SBLI policies are cheaper.

The Plotnicks received all of the advice enthusiastically, though a week later a frazzled Veronica reported that they had not yet managed to act on it. ''Fred's teaching summer school,'' she said, ''and Danny's come down with a full-blown case of poison ivy, so we haven't had the time to do anything.'' But she added that the couple had been reviewing the session ''and we agreed that the most important thing we learned was that there are ways to get what little we have working for us.''