Savings Account or Stocks?

Question

I'm 21, in college, and poor (the last two seem to go together well) I want to start saving money for myself, but I would like to know if it is wiser to put money in a basic savings at a bank or go with another investment option. I have no clue about stocks, IRAs, hedge funds, etc. so if anyone knows what I'm trying to get at I would appreciate some advice! Thank you!

To Robert L: I am thinking long-term...

Answer 1

1. Any money you need to pay for your education (college and any grad school) should be invested in a safe, short term investment. A bank account or money market fund would be good. Don't risk your educational funds in the stock market.

2. Have an emergency cash fund--something like 3 to 6 months living expenses, also invested in a safe, short term investment. As you go to your first full-time job, you'll need cash to move, buy professional clothes, put down a security deposit for an apartment, buy a car, etc.

3. If you have any credit card debt, pay it off. Don't carry balances over from month-to-month because the interest charges can be very expensive. (E.g., if you make $500 of charges in a month and pay $400 at the end of the month, some credit cards will charge you interest on all $500 for that month even though you paid most of it at the end of the month--bad credit card behavior.)

4. For long term investing, start with a lifecycle or target date mutual fund. These funds are designed for retirement savings, and are professionally managed to allocate your money into a diversified investment portfolio. You don't have to do the investment strategizing yourself. They're a good way to start, and you can branch out into other types of investment as you become more experienced.

5. Use retirement accounts like IRAs and 401(k)s whenever possible. You have to have "earned income" to make contributions to a retirement account. So if you haven't worked during the year (and therefore have no earned income), you can't contribute to a retirement account. But open a retirement account as soon as you can. The earlier you start, the happier you'll be when you retire.

See the webpages below for more info. about the topics discussed above.

Answer 2

If you have any consumer or credit card debt, don't even think about stock. The best investment you can make paying off debt. Think about it, if you are pay an extra $50 per month on a 16 percent credit card, you will be "making" 16 percent on it instead of, perhaps, choosing a loosing stock. The 16 percent is guaranteed, the stock may make 25 percent, or may make a negative 25 percent.

Beyond that, you should have at least one month worth of living expenses in a savings account before buying stocks. That way you have easy access to the money if you were not able to work, and before disability insurance would kick in.

Answer 3

It depends on how much you have to invest and how liquid you need for it to remain. At your age, I would probably buy some no load stock (equity) based mutual funds from one of the multi-service discount providers. Those funds are going to give you the most return for the least risk, and you can take your money out when you need to. The provider can give you advice about which one (pick a Morningstar 4 star rated fund) and then guide you to some of your other options.

I used Fidelity.com because it is all web-based, very inexpensive, and the service people can really help you understand how to put together a financial plan.

By the way, congratulations on being so young and making a commitment to learn about your finances and to saving. It's a rare thing in someone who is 21.

Good luck!

Answer 4

stock is not always profitable. it's profitability has risk premium compared to regular saving and or CD.

focus on your study first and if you need some extra cash, consider doing part-time job. that is much better than straight away jumping into stock market. learning to invest in stock require commitment and money (e.g. fees & market info) which to me, is better spend in your study first. after all, by getting good grade, you can get better jobs with better salary. or at least, if you consider to start small business, the money you have can be used for initial start-up.

however, you can start learning now while accumulating some fortune later. depend on the market, you can begin with mutual fund so that you can gain emotional test before you actually invest in stock market.

Answer 5

You didn't mention whether this savings is for long-term use or for short-term use. If it is for long-term the stock market is the way to go. You need to educate yourself on investing. There are many fine books available. One I like is "The Future For Investors" by Jeremy Siegel.

If you want to spend the money in a few years, it is safer to go with savings bonds or bank savings.
.

Answer 6

distinctive states have distinctive regulations approximately debt and approximately assets concerns. once you're married oftentimes your better half will pay. in case you're actually not married then all your expenses would be settled by utilising your assets. in case you very own assets then your borrowers will come after your assets to objective and get their money returned. in case you very own no longer something then there is no longer plenty they are able to do. although in case you have the credit status for an infinite mastercard i could assume you have some sort of assets. in actuality you would be starting to be a extensive mess for whomever is left at the back of to preserve your affairs (no remember if that be a verify, better half, sibling, stable pal, your legal expert, etc.). in case you have genuinely no person to place by way of this and no assets there is no longer plenty your lenders can do in case you finally end up ineffective. basically determine you're truthfully going to die. My uncle replaced into given 3 months to stay, has a radical, final threat surgical treatment, and 15 yrs later remains going sturdy.

Answer 7

Open a brokerage account at Zecco and invest in the ETF DIA.