Best place for short-term investments?

Question

Here's the detaiils: Suzy Q is a good college student with a scholarship to a state school and well-meaning parents who set up a savings account for her while she was young. This account has around $20,000 in it, but it is currently in an account with a lousy rate. Originally, this account was intended to be put toward college, but Suzy miraculously hasn't needed to touch it because she maintains a full ride scholarship and works for her living expenses.

Suzy's parents have turned over the control of this account to her, but she is just beginning to learn about personal finance. What would you recommend Suzy do with her money until she learns enough to feel comfortable with making a long term decision?

Answer 1

Suzy should put the money somewhere safe until she learns more about the risks and benefits of investing, and decides what the purpose of this money will be and when she'll want to use it.

There are Bank CDs and Online Savings accounts that pay over 5% a year, that are FDIC (federal government) insured up to $100K.

Go to Bank Rate.com to find the best rates for the savings accounts and CDs.

Answer 2

The very best thing lucky Suzy Q could do is talk to a trusted financial advisor. There are many options that are safe, will guarantee a return on the investment, and won't necessarily tie up the funds for years. Ask friends for a referral if they use financial advisors, if not, seek help at a bank where most have professionals in this category. I work in a bank and we have a financial advisor at the ready for people just like Suzy Q. In any case, do not leave it in an account with a lousy rate, that makes no sense at all.

Answer 3

Does Suzy know what an opportunity it is to have that much money to invest nowadays? Internet is the best media for that. Just ask anyone who's experienced in online home business. They'll say that with less than $200, anyone without any web/programming/marketing experience can create a money making website these days. A lot of these sites are actually making hundreds of thousands of dollars each month. Just search the web. You'll be surprised to see the potential of the internet as a money generating media for decades to come.

Don't be turned down by those people who keep saying that online business is just a scam. They say that because they've failed in the past, or seen somebody else fail. But why do they fail? That's because they keep dreaming on making thousands of dollars without investing a single dime. It will be a miracle if they can succeed.

Do you know how many people are actually succeeding in this kind of business? A LOT!! But only very few of them started out with zero budget.

Money making online is not a scam only if you know how to do it right. What I can't answer is what Suzie can do with the rest of her $19,800.

I hope my answer will be useful for you. Let me know if you need further assistance. I know some services that work and some that don't. (Don't wanna mention it here, though, it'll be totally unethical.) I'll be more than glad to personally help Suzie. My email is [e-mail]

All the best!

Answer 4

Suzy Q, I think your best bet is to discuss this issue with a Financial Specialist at your local Bank. They will be able to assess your needs and recommend an appropriate product. However to answer your question CD's range anywhere from 30 days to 5 years. Money Markets are solid choices as well. BankRates.com is a great start, always ask for the rate before they quote you the APY and shop around, sometimes banks will match rates, good luck Ms Q.

Answer 5

It depends on how fast you could get rid of the student debt (providing that is the only debt you are having to pay on...). If you could pay it off completely in 1 of the three years, for example, you could then put that entire payment amount into your savings plan for the last 2 years, instead of splitting your money the full 3 years to put towards both debt and savings. If you are unable to pay it off in a significantly shorter time than 3 years, I would recommend paying smaller amounts (but sufficient) towards the (usually) low interest student loan debt and then putting as much as you can towards your savings plan. Funds in an IRA account, depending on which brokerage you are holding them in, can be invested in mutual funds. These well-managed funds, if chosen carefully, can average 10-16% on an annual yield. That is the best percentage rate you will be able to get anywhere. The closest thing to that would be either short-term trading in a traditional account, which has a tax and fee structure that would likely eat into your funds pretty deeply, or buying cd's at a bank which can average between 2-6%. So, depending on what you can do about the student debt, putting money into your IRA (around $4k annual maximum contribution limit) and then investing it in mutual funds that are carefully chosen based on their fee structure and long-term average interest return is the best way to go. HAVE FUN!

Answer 6

A CD would be OK but not worth being tied up for the rate of return.
A high interest savings account would be better like www.emigrantdirect.com at 5.05% it's still liquid with a rate that at least beats inflation.
This would be good for an investment for up to 2 years or so. If you are going to save it for longer go for something with a higher return like mutual funds and ETF's.

Answer 7

That is a good question for bankers.

Answer 8

put it into a CD