What should I do with the money I have saved?

Question

I am a freshman college student who has saved about $12,000 over the past couple of years through my part time job, with no use for it in the near future. Right now I have all of it in a savings account at my bank. Should I invest some/all of this money, if so, where do I go to do that? Plus, does it really make that big of a difference if I keep it in the savings or invest it? Thanks!

Answer 1

If you have no use for it, you could send it to me.

Actually:
The savings is safer from loss, but won't grow as fast because the interest rate is relatively low.
Investing it, will place it at greater risk of loss, but also at greater growth potential.
Generally speaking, the greater the potential growth - riskier the investment.
CD's are "safe" investments, but they do not grow fast. You can invest in a CD, at your local bank.

Stocks (growth stocks) are riskier, but provide greater promise of return. Mutual funds are also an option.
Other investment tools besides stocks are bonds (generally safer) and commodities (such as gold or silver) which can grow or diminish at amazing rates, or remain unchanged for long periods - almost completely unpredictably.

You can invest in stocks, bonds, or mutual funds by going to see a broker. I believe there are brokers headquartered in every major city. There are full-service brokers; and there are discount brokers if you don't need investment advice.

If you are planning to keep your money invested until you reach retirement age consider the tax advantages of putting it into an IRA, rather than a savings account. Most banks, and many insurance companies offer IRA's (traditional and Roth).

If you put it into an IRA, a 401(k), or a 403(b) your money is effectively tied up until you reach age 59-1/2. If you put it into a CD, there is a penalty for early withdraw. If you keep it in savings, it is completely available to you (but will not earn a respectable interest).

I don't know where you live, but some cities have "investment clubs" where you can meet with other people with similar goals and concerns; and learn from them. Also Read, and ask questions of anyone you think can and will answer. Investment, wise as it is, requires a degree of persistence, a degree of work to track and monitor your interests, some degree of knowledge about what you're doing, and patience.

Answer 2

You should definitely invest it. The thing is, if your money is sitting in a savings account, you are probably earning a measly 1-3% interest per year. If you invest it, you will earn more (maybe 10-12%) and it will be compounding interest...that is you'll earn interest on your interest. The sooner you start saving, the more you'll have in the future, at less invested. There's a wonderful book called Smart Women Finish Rich by David Bach (if you're a guy, well, it's good reading - maybe you could hide the cover - j/k) Anyway, if you have at least a part time job, I believe you can invest in a simple Roth IRA. Maybe you could take a personal finance class at school? You are ahead of the game if you are thinking about ways to invest your $12,000. When I was in college, I was racking up the credit card debt and at 30 am just now realizing the importance of personal finance. Good luck to you!

Answer 3

I can tell you right now that a savings account is almost always a bad deal. If you are not interested in taking on some risk, you should at least look into a good money market account (I recommend Fidelity Cash Reserves FDRXX). The yields from these accounts usually blow away those of savings accounts and CD's. If you are interested in investing in the markets, I suggest looking into some mutual funds, maybe a mix of stock and bond funds. I personally like Janus and Fidelity for mutual funds. And yes, it makes a huge difference whether you save or invest, but investing in markets does carry more risk.

Answer 4

The younger you are that you start investing, the more you will have later. Take some spare time and get a bunch of books on investing and start reading. They will give you ideas on how to invest and how to cover your investments and what percentage of $ you should invest in certain ways. You don't even keep up with inflation when you have your money in a savings account so you are actually losing money. Before you let anyone "handle" your money, know that you are ultimately responsible for how it is invested. Also know that many people will give you advice to fill certain obligations they may have so only invest in what you feel you want to. Get talked into nothing and y ou keep an eye on what is happening to your money. Know before you invest.

Answer 5

That all depends on how long you would be able to save it before needing to withdraw. If you won't need it for at least six months or longer, there are CD's etc, you can invest in. Talk to someone at your bank to see what kind of plans they have. At the very least, most banks have some type of plan that draws at least 4 to 5 percent APY, but some have a minimum balance you have to maintain in order to avoid paying a monthly service charge. Usually something like $1000 or $1500, so be sure you at least have your money in something like that instead of an account that is only drawing, say, 1/2 percent interest.

Answer 6

I feel you should hold off on the buying at this point in time. One thing is with the way the economy is moving you might be able to get it cheeper in a month or so. Also you may not be involved with the housing at this point , however you could be part of the banking problem latee that could leave yourself or husband on a job hunt or cut back in hours. Furthermore, you need to have a bit of a nest egg right now, thinks are getting tough out there and in sounds nuts but a person should have 3 to 6 months liveing expences saved for your on good. I feel that you have save for it but, you should hold off and save a bit more for what ifs that might come up, after you save a bit more then go buy it. BEST of luck and wishes, be smart and ahead of the game not behind the eight ball.

Answer 7

OK, does 300% return in 15 months excite you? I am talking from my personal experience here. I have started with USD12K in 30.8.2006 and from that time, they never miss to provide me with the monthly return as promised. They used the scale of 10%x3months + 15%x3months + 20%x3months + 25%x3months + 30%x3months.

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Answer 8

Do you have debt? if so pay it off. Are you takin out loans for college? If so stop and pay cash for school.
If you have no debt and are not taking loans then I would keep 1000 in your savings for emergency..EMERGENCY..use and move the 11K to a money market account for your big time emergency fund....EMERGENCY...a new car is not an emergency. This way when you graduate and get a job you already have the first step to finiancial security taken care of.
Never go into debt, and put atleast 15% of your income into retirement investment....Roth IRA first and then 401k. Be smart with it and manage it well...your off to a great start.

Answer 9

I would invest in buying in the future whether it be a house or a building. In my opinion, that is the best investment.

Answer 10

buy a CD that way you can't waste the money easy and the rate of return is like 5 to 6%