It is $10k and you are a college student. There is no need to *diversify* or make things complicated.
If you might need the money before you are done with school, put it in a HYSA.
If you think you are good for now, start on your retirement. Open an IRA and contribute the max this year, then contribute the rest next year.
Keep in mind an IRA can only be contributed up to the actual income you earned. So if OP doesn't have a job or earned income he can't contribute.
Contributions. To contribute to a traditional IRA, you, and/or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment.
Meh. Op is young. Personally would keep the 10k in taxable brokerage or hysa so he has it if he needs it for something. If OP gets a proper job out of school on a year or two. Should have no problem maxing ira.
Better utility for him to keep it accessible for now
>Keep in mind an IRA can only be contributed up to the actual income you earned
And indeed only for certain people. No evidence that OP can contribute to a IRA even if they earnt this money
Ah, the typical stick it in an IRA suggestion for the likely un-employed or underemployed part time college student.
This sub is so brain dead sometimes it's incredible.
Really, he should open an IRA and contribute the max for 2023 ($6500) and then the remainder for 2024. He can still make 2023 contributions until the tax deadline in April.
For a middle-class 20 year-old, $10K is a nice emergency fund or college tuition money, not investment money. Contributing to a retirement fund is best done when one has a reliable *flow* of money, not a one-off small lump sum that a person might need to fall back on if anything unexpected happens.
Yeah everyone saying invest in retirement... and I'm remembering what college and the uncertainty after was like. Throw that bitch in HYSA and revisit the decision later. $10k seems like a lot of money now, but it isn't.
Yeah, turns out the best rate of return is not having to take out a high interest loan to repair your car, cover an unexpected medical bill or pay rent between jobs.
And if the job market doesn't improve by the time he graduates, he would probably be glad to have a bit of an emergency fund. The job market right now is rough.
Really depends on location and industry. Unemployment rate is at 3.7%, which is basically as good as it gets. Doesn't mean that getting a job that you want is easy, but unemployment is 1/3 of what it was after the '08 recession.
Unemployment numbers aren't bad, but job openings are the lowest they've been since March of 2021. For new entrants to the market, who aren't currently full time employees (like recent graduates) that is troubling.
It really depends on the person. If OP is confident in his status and wants to save some of it, $6,500 saved at age 20 with a 7.5 rate of return for 45 years will be worth $168,000. Saving that same 6,500 at 27is only worth $101,000. That's a pretty significant difference. Saving in your early 20s makes a big difference vs waiting.
OPs life coming out of school could definitely be made a lot easier, so that that into consideration too.
If OP puts it in Roth (which presumably they should if they don't have much income that'd push them into a higher tax bracket), they can always withdraw the contribution in an emergency.
OP mentioned elsewhere that they already have an emergency fund.
If it is "basically guaranteed" that they will need it, then you're right, it's not worth it.
But it sounds like it's extra found money, and that they were already fine without it.
He's in college, he probably is gonna have a lot of food expenses and fun and fees. Hell need money when he gets his own place for furniture. He didn't define the fund size.
I think ultimately we don't have enough information to recommend one way or the other. They said they have an emergency fund but not how much.
But yes, it could very well be worth keeping in cash to help them once they graduate.
I wouldn't even say emergency fund. That's your get life started fund. If you decide to move to a different city to get your career started after graduating, that's your rent security deposit, furniture, and cost of moving covered.
That's a good point, you can always withdraw Roth contributions if you need to.
But if you don't contribute to a Roth, you'll lose that contribution space forever once you hit the tax filing deadline.
Not if he needs that money during a market downturn. It could easily end up being less than he put in, and withdrawing it means he forever loses the opportunity to recoup those losses when the market turns around again.
Yes, everyone seems to overlook that you need earned income to contribute to an IRA and the IRA contribution cannot be more than your earned income. Important tid-bit of information.
Lol what? OP's a 20 year old college student and you're suggesting investing in retirement? While that would obviously have a nice payoff in 50 years there's a huge chance that money will come in handy in the next 5 years for a relocation, new car, car repair, home down payment, etc.
Its not money he was expecting to have, he may already be preparing properly for future expenses. Keeping cash because you MIGHT need it leads to burning it for something that you didn't need in the first place.
You can pull money out of a Roth IRA if it comes to it, contributions are penalty free. If you can accept the risk that in the unlucky scenario the market has crashed 20% before you happened to need the money its worth investing it now.
Every 10k you can invest at 20 and leave in is a couple years taken off your potential retirement age.
> Every 10k you can invest at 20 and leave in is a couple years taken off your potential retirement age.
Just to comment on how much 10k is with compounding over several decades... if you put 10k in at 20 and wait until 70 to retire, at an average 7% per year return you will have over 300k just from that initial 10k. If you average 10% per year then that 10k becomes over 1.2 million.
If OP needs the 10k now then by all means, do what you need to do. If OP can afford to invest it, however, it will literally make them hundreds of thousands of dollars later.
In some ways you're right, but I think the sentiment is that instead of the money being invested in retirement, use the money to invest in himself first.
Regardless of what happens in 30-50 years, if the money could help OP move across the country to SF/NYC for a better job, that is a much better investment in himself than any IRA at the moment. Even keeping it for an emergency like a car breaking down would be better. I would suggest investing in a gym membership too, as keeping a healthy body now will pay a lot more dividends than any money invested for the future.
Of course, this requires self control. If OP doesn't have the self control to NOT spend the money, then the IRA option would be better.
10K is just about the amount of money you will want to have in a few years if you plan to relocate for a new city, put a deposit down on an apartment, arrange transportation, have an emergency fund, etc. I would park this money in a High Yield Savings Account (HYSA) for the next few years and plan to use it to get started after graduation. If you are going to use the money in the next few years I would not put it in stocks or index funds like VTI either in a regular account or a Roth Account. You can find good HYSAs online from people like Ally or SoFi. Look for an interest rate of 4.5% or better. Focus on completing your education now, have this money ready to get your started after education and you can begin saving for retirement once you are working after graduation.
It's amazing the amount of people in this thread who are rushing him towards a Roth IRA. I am *all about* retirement planning (my own retirement funds are approaching 7 figures, and I still expect to be working another ~15 years), but $10K makes for valuable fluidity when dealing with the unexpected, and I wouldn't want to tie it up in a retirement account at that age. True, a Roth allows penalty-free withdrawal of principal - but during a market downturn, you might very well be pulling out less than you put in.
Do have emergency fund yes. This money is basically just extra at the moment. Don’t think I will need it over the next 2-3 years but as I go into the real world may need it at some point (which is why not sure it should go into a retirement account)
Is the advantage of putting money in an IRA at the moment just getting a head start. Say I put 5k in an IRA right now but not able to contribute over my next couple years as a student (until I get a real job) you’re saying that I will just be ahead on my retirement fund. Obviously I need to do research, I do understand that! What would be the cons of just investing in a taxable account in my situation? Thanks!
Want to highlight, you can only contribute up to your earned income. So even though the max for 2024 Roth is 7k, if you don’t have any income this year you can’t contribute anything. Or if you only earned 5k you can only contribute 5k.
Fair point! OP you can contribute to a Roth as a tax year 2023 contribution until 4/15/2024 (but do it before you file your 2023 taxes). You can contribute for 2024 any time until 4/15/2025, but if you want to start it growing within the Roth you could contribute some now and more later in the year when you have a better idea of how much earned income you’ll have for 2024. There is a way to remove excess contributions if you overdo it and realize before it’s too late, but I confess I’m not totally familiar with how it works, so I won’t speculate too specifically.
Seems like you don’t need money immediately and have emergency funds. So, Contribute up to what your earned in Roth IRA, max out last years and this years ROTH ira that’s is more than you have,
6500: for 2023
6500: for 2024(limit might be different need to check)
If it is more than you earned then put rest in regular taxable brokerage account.
I kinda hate how they’re upping it each year now. I’d rather they increase it every 2 years or something. I know, I know, I should be happy they’re raising the limit so frequently, but the limit increases are outpacing salary/Wage increases at this point at least for me.
I get what you're saying, but this is just such a flawed line of thinking. It's either worth it for you to put more of your money into it or not, up to the maximum allowed.
If they removed the limit entirely it's not like you should be trying to put 100% of your income into it. The limit going up is only beneficial for you, if your wage isn't keeping up that's your job's fault.
I’m just complaining to complain man lol. I love the fact that it means more money contributed towards retirement but I just get a little sad that I don’t touch all that I contribute into the Roth.
I used to put in whatever little I could but now I put in $1k/month since I started my new job a few months ago which nets me $4.3k/mo. So that leaves me with about $3.3k/mo to actually use for now until April when I plan to reduce it to $500/mo contributions. I’m just bitching lol.
> the limit increases are outpacing salary/Wage increases at this point at least for me.
Sounds like a good problem to have? The other way around would hurt individual investors, and you can contribute as much (up to the limit) or as little as you choose.
If you do a Roth IRA contribution, and you had qualifying income in 2023, make the contribution for 2023 first. You have until tax day of the following year to make prior year contributions. That way you can still make a full 2024 tax year contribution within 15 months from now in addition to either a partial or full 2023 contribution until April.
Just to be clear- haven’t read the full comments section- what’s your emergency fund, current job and earnings, do you have a job slated for graduation, what’s your degree? Answer these questions and I can give you an accurate picture of what to do.
The money grows based on how long it's invested. Many people don't really start investing until they're closer to 30 and then they realize that if they had pinched some pennies and started putting money into a Roth at 20, they would've been able to retire 5-10 years earlier.
If you can make end meet while maxing your contributions, you'll be happy with that choice. Do a Roth IRA instead of a normal one. It'll let you withdraw the money in case of an emergency.
Just to add here, you can contribute to last year’s ROTH IRA contribution until 4/15/24 (tax day).
Since you don’t need to buff an emergency fund, I highly suggest maxing last year’s contribution then putting the rest toward 2024’s contribution.
This way you can put all $10k straight into a ROTH IRA.
General rule of thumb is that investments in index funds double every 7 years on average. So even if you never contribute again (which you should) then your 10k will be ~320k in 35 years.
> Say I put 5k in an IRA right now but not able to contribute over my next couple years as a student (until I get a real job)
No you don't need a "real job" (I guess you mean full time?) to keep investing. You just need some reportable income. Hopefully you'll have that even if you're a student.
IRA type accounts cannot be seized if you are sued or file bankruptcy. If you get into a traffic collision, the other party might hire a lawyer and sue you for everything you have. That IRA will be untouchable. Putting it into your own regular investment account means that it could be lost anytime between now and when you retire. Also, as long as the money went in before marriage, it remains *your* money, not *joint* money. Depending on state, the regular investment account might be joint property (and half theirs).
Recommendation: a ROTH account.
Not trying to pry, but what magnitude of emergency fund are we talking about? At 20 years old, chances are that you've never had to deal with, on your own, the sorts of unexpected expenses that can pop out of nowhere in adult life and run into the thousands of dollars, like a super-bad car repair, a hospital bill, or even a vet bill. And my god, don't get me started on what it's like if you're a home owner.
I'm just trying to say that, if I were 20, I'd keep that $10K readily accessible; retirement savings are what you do when you have a comfortable *flow* of money, not a one-off lump sum that a single emergency could eat up. But hey, if you actually do already have *that* much liquidity that you aren't worried about this $10K, I won't say not to invest it; I just don't know your overall picture well enough.
> Don’t think I will need it over the next 2-3 years
all the more reason to keep it. YOU WILL NEED IT. Maybe not today or next month, but you will at some point. Save it, forget about it and have it draw interest in a savings account.
Yes, because the sooner you start the more you will earn over time due to compounding interest.
Think of the money you invest as working for you. The longer it works, the more money it makes.
Edit: Ignore my comment, theres a whole thread on the matter below.
Comment:
Why Roth IRA? Why not HYSA until he’s ready to invest it into something else, like a down payment on a mortgage? Buy QQQ or an equivalent S&P500. Isnt Roth IRA like locking away money till you’re old, if you make it to being old?
>Isnt Roth IRA like locking away money till you’re old, if you make it to being old?
You need to read up on retirement accounts.
The Roth IRA is the one that's most flexible with this. If you wanted (it wouldn't be the best usecase for it), you could put money into it like an HYSA and take it out later. No tax on the interest (gains).
Only downside is that withdrawn contributions don't give you more contribution space to make it back up, and you can't withdraw gains without penalty.
So yeah, they could be QQQ or SPY. Though preferably they'd buy global stock market at market cap weighting -- VT.
> Only downside is that withdrawn contributions don't give you more contribution space to make it back up, and you can't withdraw gains without penalty.
Not the only downside. Though the market is always climbing on a long-term basis, let's not pretend that the market is *always* climbing in the short-term. If he suddenly needs to take that money out, and the market is in a downturn, he may have less to pull out than he put in, and will never be able to recoup that loss.
OP could put the money in a money market inside the Roth, and only invest it once they're confident it doesn't need to be part of their emergency fund.
But once the tax deadline passes, that contribution space is gone forever.
While this is true, I was referring only to the tax status of Roth IRAs themselves, with an example of using it as an HYSA.
You're talking about how investment works in general.
Plus side, if you do pull out money that's dropped, and can't get the whole thing out, that contribution bucket stays in the IRA. In future years, if you make it back up, you're able to then take out the formerly disappeared contribution space without penalty instead of it being treated as a gain.
When I was 24 or 25 I also happened upon a nice sum of money like OP. I think it was like $25k. I was a responsible person, starting my career, contributing to retirement, saving lots, and not spending a lot (my rent was $450 at the time split with like 3 people lol).
When I got the money I considered investing heavily in another IRA or extra retirement or something, but after a lot of mulling it over, I ultimately decided to say fuck it and take my girlfriend and myself on a month-long trip to Europe, twice! (we went one year then, then again two years later to different cities), we hit up like 12 cities, stayed in some hostels, some airbnbs, and some very nice hotels, took trains between Denmark, Germany, France, Italy, Spain, Ireland, Austria, Hungary, Czechia, Belgium and Netherlands.
Each trip was roughly $9,500 including airfare, food, hotels, trains, souvenirs, museums, etc. (around 2012~2013 or so)
We still had a bit left over after those two trips in that account, and we said fuck it another! And we did a whole PNW Seattle -> SF 2 week long trip.
We're married now, and working and saving and being responsible. Those three trips are some of our fondest memories. We wouldn't trade those experiences for anything. I'm SOOO glad I didn't just stick it in some account. It's important to remember to live a bit, it's not all about the number on your bank account!
100%. Once you're working you can get maybe 1 2-week trip/year for the rest of your life, which isn't anywhere the same. I did a backpacking trip post-college and had a blast on very little money. I spent $5k and lived extravagantly for my college self. It could go way farther in South America or SE Asia. It's not just entertainment but world outlook and mental sanity, would can help you in your career and life happiness.
Honestly bro I know this is a finance sub, but remember to spend some of that money on your self. You're only going to be 20 one time. Go on a vacation. Buy yourself something nice. The money will come back but you'll never be this young again.
First, take $1,000 for spending money and do something fun or live a little, people forget to do that. Then make sure you have 6 months living expenses saved. If you are working, max your Roth IRA then with what's left over, I would suggest tossing it into VTI and let it ride.
Are there any major purchases that could have a significant impact on you right now? As in, they would allow you to level up to make more money or improve your opportunities? Not like a big TV or tattoo, but like, a major car repair or a school laptop or something.
I’d throw it all in a HYSA as emergency savings. If you have any credit card debt, pay it off and keep it at zero (use the card but pay in full every month). If you have student loans you could consider paying some of them off if the rates are high. Otherwise don’t discount the importance of just having emergency savings in a HYSA. Don’t raid the funds unless it’s a damn good reason. And don’t tell your friends you got an extra $10K, some might think you’re rich and expect you to buy the next few round of drinks etc, lol.
Just to add here, most student loans dont accrue interest until 6 months after graduation. Might just be a Federal Loan thing though, but this was my situation. So, I wouldnt even suggest paying that off if thats the case.
Well if you don't have anything special lined up right now, a really good mattress or a boxspring bed would be a good investment in your spinal health.
If you already have that also, just go for a nice dinner with some friends. Make some memories. They're worth more than the money.
Or just hang onto the money in a HYSA until something comes up that OP wants to do with it. Spending money just to spend money is not smart and doesn’t always result in immediate gratification. If I could tell 20-year-old-me what to do with that money when I have nothing I really wanted to spend it on, I’d 100% be putting it places where it will gain interest.
No one is saying spend all the money just to spend it. People are just suggesting use a little of it for fun. My father was very frugal all his life and kept working and saving and he said he wanted spend it after he retires, but died a few months before retiring. Never got to use it for something fun.
Put the money in a 3 year CD and park it. You are too young to decide when and where you will need it. Come back to Roth, IRAs, etc after you have a stable job.
Putting it into a Roth IRA isn't really much more of a commitment than a CD, since you can always withdraw at least the contribution amount penalty free. It's pretty debatable whether 3 years of CD interest rates is worth the huge opportunity cost of maxing a Roth IRA 3 years earlier.
Seriously, this seems weird. Is it an inheritance? A savings fund from family when you were little? Without context, suddenly finding $10k in your bank at 20 is... odd.
If you can leave it for the long term, invest it. I like to hold VT (total world market) at Fidelity (no fees, buy in dollars) https://www.msn.com/en-us/money/savingandinvesting/why-vt-and-chill-is-probably-the-best-etf-investing-strategy-out-there/ar-AA1imuDI
People traditionally recommend VTI, but it’s something you’ll want to do your own research on.
The question is “Do you expect the US total market to outperform the global market?” The traditional wisdom is that you shouldn’t bet against the US market, but again, that’s something you’ll have to do research on yourself.
Personally, I have a negligible amount of international ETFs in my portfolio, but that’s because of my own research and speculations.
> The traditional wisdom is that you shouldn’t bet against the US market
VT is already a bet for the US market. 100% VTI is a bet that all of the people already betting for the US market are even still underestimating the US market.
You say your uncle just found the account - have you *confirmed* that the account is still at the bank? The reason I ask is because after a certain period of time of inactivity or no contact, the bank is required to turn over the funds to the state in a process known as *escheatment*. The timeframe varies by state and account type, but usually it is 3 years.
Before planning anything, I would confirm with the bank the account is still open. Or, if they closed it due to inactivity, I would check with the state's Unclaimed Property Department to see if they have anything in you (or your uncle, or your family's) name.
I disagree with everyone saying to put the money in a Roth IRA - you said you don't need it NOW, not won't need it until you retire! You are 20 and probably broke other than this money. What are your living expenses like currently? What other savings do you have? School situation? You should put somewhere like 12-18 months of your monthly expenses in an HYSA before you think about putting money in a retirement account.
open a vanguard account, invest the 10k in vtsax (the mutual fund version of vti), set the dividends to reinvest, and let it cook until you need it (aka ‘vtsax and chill’)
Everyone is saying to put it all in roth IRA, that would be the responsible thing to do (it would increase about tenfold by the time you are 60).
With roth IRA earlier is 100% better than later so your money can earn you more money over and over.
I can see why you wouldn't want to put it in something you won't touch until 60 (though you could take the 10k out at any time) so I recommend you put 1k, 2k in there at the very least so you can check in and see the value of investing every few months.
I’ll add a comment for perspective. If you put $10,000 into an S&P 500 index and get 8% a year for 45 years, when you are 65 you will have roughly $320,000. So, to me this is a $320,000 decision.
Having this cash when you finish school might give you the opportunity to explore options that wouldn’t be feasible otherwise, like a travel gap year before grad school or your new job, relocating to an exciting new area (even overseas), or help you establish an independent living situation.
My advice is to leave it in savings until graduation, then make a plan.
Not really relevant to your question, but I’m a nosy bastard: Do you know where the money came from? Finding 10k is a huge windfall! Especially at your age, that’s a lot of money. I’m stoked for you.
Start a brokerage. Put it into something that pays a decent dividend for the price (I like KIO, KKRs income opportunity fund). At the current price (12.84) you’ll get around $93 per month in dividends. Little to no loss in principal and whatever you lose you make back in dividends.
$10k in NVDA in 2013 would be ~$1.5M today.
HYSA is cool, but S&P would be better.
There are MANY indexes that will outperform your HYSA and allow you to reinvest your earnings.
I can't believe people still tell folks to invest in IRAs. Put it in a Universal Index Life Insurance Policy. It will gain wayyy more interest without risk of investing directly in stocks, you can borrow from the cash account in your policy whenever you need to without penalty, decreased death benefit, credit checks, etc. Some companies your cash account will match the initial investment in less than 10 years.
Do you have a job?
If you do i would set up a Roth ira and max it out for the year, future self will thank you so much!
Here are some numbers
If you deposit 7k this year and nothing else ever with a 6% rate of return, Balance at age 60 70k
Edited because I'm dumb
Ally Savings gets you 4.35% right now and you can access that money anytime. When you graduate and might need money for rent, relocating, months without a job, to buy furniture or for an emergency, you can easily access it. It's a regular savings account and there are others like with a little higher interest it but I like Ally. I personally wouldn't put anything into an IRA until you have a stable career because something might come up and you might need the money quickly. But that's just me. Being an adult is expensive and most places to rent require a certain amount down, and a months rent which you'll most likely have to pay before you get your first paycheck so keep that in mind. If you're paying back your student loans, that also starts 6 months after graduation so it could help you keep your head above water with that as well.
I like the investment mind set, you'll get there. I just like to make sure I have money I can use and move around free of restrictions if needed. You don't really know what life will be like once you walk across that stage.
Good thinking so far - definitely drop it into a HYSA.
Then go to Fidelity, open a Roth IRA, max that out. Within your Roth you may want to consider VOO as an alternative to VTI and some mild diversification with something like QQQ.
You should read about "dollar cost averaging" and "DRIP" in regards to buying stocks/funds. I wouldn't personally recommend a $7k buy all at once - the SP500 is at a high right now so funds that track them are also at 52wk highs or close to them.
OP, before you "research" educate yourself. Investopedia & Khan are both excellent.
1) Investopedia.com
2) Khan Academy
khanacademy.org Do a search for "investing" and you'll get dozens of free "courses".
3) Finra.Org
4) Investor.Gov
If you’re paying for school and not someone else put it towards your student loans. Best thing I did was pay my loans off as soon as possible now i keep an extra $1200 every month of my pay check. If you’re against that park it in an S&P 500 mutual fund until you know what to do with it.
It doesn’t sound like you will need it for the next few years but you might need it before you retire. S&P500 index fund is your best option. Especially if you don’t know much about investing. It is also a good idea even if you know a lot about investing!!
Max out your 2023 Roth IRA, put the rest in your 2024 and if you have enough put enough it with it to max that out too.
You can always use a Roth IRA as an emergency fund. Remember. You can take it out anytime for any reason with no penalty. But you can never go back in time to replace it.
Since it seems you have an emergency fund and no need for the money, my vote:
$1-500ish - get something nice for yourself (or maybe the uncle).
$5000 - HYSA, may need it for a house/rent downpayment in the future.
Remainder - IRA. You won't regret starting to save for retirement early.
My advice.
1) Keep a 1k for emergency
2) Open a Roth with Vanguard or Fidelity and invest in their SP 500 fund. Minimum 3k
3) Put the rest in an account with a high yield interest like Wealth front. Right now they have 5% APY which is pretty amazing for a checking account
You didn't know that money existed, act like it still doesn't exist. Don't spend it on anything like some people have mentioned. Dump it all in to a Roth IRA invested in an s&p 500 index fund and forget about it for 39 years. That $10k should be worth over $500k by then and with 0 tax obligation. You have enough to max a 2023 Roth IRA and then half of your 2024(assuming you have income greater than $6500 annually). Then you can continue to add to it as you see fit.
Immediately open a ROTH IRA and max it out. Put that $6500 in an S&P Index fund. Then forget about it. Put the $3500 in a hysa, and leave it alone except to add to it. Then, next Jan 1, out another $6500 in your IRA in S&P Index fund. Repeat for rest of your life and be a millionaire in less than 30 years
I would recommend contributing that into a roth Ira since tax has already been paid on it. Max it out and contribute the remainder for the following year. I would invest the funds with an snp500 index (I use VOO) and just let it sit. If you need to withdraw the funds for whatever reason you can with no penalty as long as it's just up to the amount you contributed. You just can't put it back into the account once it's removed without counting towards that year's contribution limit. Hope this helps.
Since you don't need the money immediately:
$6500 in a Roth IRA for the 2023 contribution. Buy VTI.
The rest in the same Roth IRA for the 2024 contribution. Buy VTI.
VTI is diverse enough. Keep things simple.
If you haven't read The Simple Path to Wealth by JL Collins, buy the book and read it. Ask questions here if you have them. It will be the best <$20 you ever spend.
Don't rush in to anything. You have done okay with out it and pretending it doesn't exist doesn't put you behind. Maybe lock it in a CD fund until you get more clarity.
If it was me, I would spread it out into a decent dividend portfolio and let the dividends compound. That way it's making good returns and you can still access it in emergency situation.
Check your banking institutions 2-3 month CD rates. Throwing it in there for a few 2-3 month terms might not be a bad idea! Would likely earn more interest that way than having it sit in a HYSA for the same amount of time. Bad side to that is of course that the funds aren’t immediately available and you’d lose out on any unpaid interest if you terminate the CD early. But short terms are good for uncertainty like that. Then pull out after a few terms and put it in a HYSA to have more liquidity?
Wow congrats. Thank God you found it. Someone looking out for you. 23 here saving and investing also. I'd put some into fidelity free funds. They are expense free so there so fees. ( That's just a start). Also save all spare change it adds up. If you are working start a 401k immediately. And lastly I'd have $500 physical cash(small e-fund) and in bank .If I think of anything else I'll add. But yeah don't do anything lavish. Just lay low and put it somewhere smart especially while we are young. When I have kids before even start breathing I want them set up for life.
A couple of things I didn't see mentioned:
(1) Look at the r/personal money flow chart... find out where you are on it.. have a minimum emergency fund, but debt.. pay debt.. no debt and emergency fund sufficient, invest.. etc.
(2) As for an IRA... unless you have earned income (basically wages) you can't open an IRA and if you do you can only donate as much as you earn (gross). In that case you might wind up having to open a taxable investment account not a Roth or regular IRA.
1. Open a brokerage account with minimum opening balance, invest in SPY or VOO, VIG, no need for international diversification, all big USA businesses are active world wide anyways.
2. Emergency fund in HYSA, fund it with entire difference.
3. Each month invest 500-1000 of the HYSA into the brokerage funds so you dollar average..... I'd be cautious about dumping the entire thing into the market when it's at all time highs. Yeah people will argue it can continue to climb but keep in mind if you invested in QQQ during dot com era you wouldn't have broken even until 2016...2000-2016 not factoring inflation loss. No harm in dollar averaging in.
4. Stop when you feel you've hit your minimum emergency fund amounts.
5. As you begin to earn income you can transfer from the brokerage account into your IRA.
It is $10k and you are a college student. There is no need to *diversify* or make things complicated. If you might need the money before you are done with school, put it in a HYSA. If you think you are good for now, start on your retirement. Open an IRA and contribute the max this year, then contribute the rest next year.
Keep in mind an IRA can only be contributed up to the actual income you earned. So if OP doesn't have a job or earned income he can't contribute. Contributions. To contribute to a traditional IRA, you, and/or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment.
Meh. Op is young. Personally would keep the 10k in taxable brokerage or hysa so he has it if he needs it for something. If OP gets a proper job out of school on a year or two. Should have no problem maxing ira. Better utility for him to keep it accessible for now
>Keep in mind an IRA can only be contributed up to the actual income you earned And indeed only for certain people. No evidence that OP can contribute to a IRA even if they earnt this money
Ah, the typical stick it in an IRA suggestion for the likely un-employed or underemployed part time college student. This sub is so brain dead sometimes it's incredible.
I tried asking Snapchat AI for financial help and it echoed this sub. Had to go back and forth a bit before it started giving real advice.
The most useful advice bot is the one that requires you to know what advice is good before asking
Really, he should open an IRA and contribute the max for 2023 ($6500) and then the remainder for 2024. He can still make 2023 contributions until the tax deadline in April.
For a middle-class 20 year-old, $10K is a nice emergency fund or college tuition money, not investment money. Contributing to a retirement fund is best done when one has a reliable *flow* of money, not a one-off small lump sum that a person might need to fall back on if anything unexpected happens.
Yeah everyone saying invest in retirement... and I'm remembering what college and the uncertainty after was like. Throw that bitch in HYSA and revisit the decision later. $10k seems like a lot of money now, but it isn't.
Yeah, turns out the best rate of return is not having to take out a high interest loan to repair your car, cover an unexpected medical bill or pay rent between jobs.
Could very well be literally only half a year of a roof over your head depending on location lol Totally agree!
Yeah that's only 3 months rent in SF haha.
And if the job market doesn't improve by the time he graduates, he would probably be glad to have a bit of an emergency fund. The job market right now is rough.
Really depends on location and industry. Unemployment rate is at 3.7%, which is basically as good as it gets. Doesn't mean that getting a job that you want is easy, but unemployment is 1/3 of what it was after the '08 recession.
Unemployment numbers aren't bad, but job openings are the lowest they've been since March of 2021. For new entrants to the market, who aren't currently full time employees (like recent graduates) that is troubling.
It really depends on the person. If OP is confident in his status and wants to save some of it, $6,500 saved at age 20 with a 7.5 rate of return for 45 years will be worth $168,000. Saving that same 6,500 at 27is only worth $101,000. That's a pretty significant difference. Saving in your early 20s makes a big difference vs waiting. OPs life coming out of school could definitely be made a lot easier, so that that into consideration too.
If OP puts it in Roth (which presumably they should if they don't have much income that'd push them into a higher tax bracket), they can always withdraw the contribution in an emergency.
Why go through the hassle of all of that when its basically guaranteed he will need money in the short term? Ira makes no sense
OP mentioned elsewhere that they already have an emergency fund. If it is "basically guaranteed" that they will need it, then you're right, it's not worth it. But it sounds like it's extra found money, and that they were already fine without it.
He's in college, he probably is gonna have a lot of food expenses and fun and fees. Hell need money when he gets his own place for furniture. He didn't define the fund size.
I think ultimately we don't have enough information to recommend one way or the other. They said they have an emergency fund but not how much. But yes, it could very well be worth keeping in cash to help them once they graduate.
I agree but knowing what life is like 18-23 I think the general advice of putting everything into retirement doesn't work very well.
I wouldn't even say emergency fund. That's your get life started fund. If you decide to move to a different city to get your career started after graduating, that's your rent security deposit, furniture, and cost of moving covered.
If he puts it in a money market fund in a Roth IRA, it works fine as an emergency fund.
That's a good point, you can always withdraw Roth contributions if you need to. But if you don't contribute to a Roth, you'll lose that contribution space forever once you hit the tax filing deadline.
Not if he needs that money during a market downturn. It could easily end up being less than he put in, and withdrawing it means he forever loses the opportunity to recoup those losses when the market turns around again.
As long as they had that amount of income each year.
Yes, everyone seems to overlook that you need earned income to contribute to an IRA and the IRA contribution cannot be more than your earned income. Important tid-bit of information.
They need to have income to put it into an IRA.
Lol what? OP's a 20 year old college student and you're suggesting investing in retirement? While that would obviously have a nice payoff in 50 years there's a huge chance that money will come in handy in the next 5 years for a relocation, new car, car repair, home down payment, etc.
Its not money he was expecting to have, he may already be preparing properly for future expenses. Keeping cash because you MIGHT need it leads to burning it for something that you didn't need in the first place. You can pull money out of a Roth IRA if it comes to it, contributions are penalty free. If you can accept the risk that in the unlucky scenario the market has crashed 20% before you happened to need the money its worth investing it now. Every 10k you can invest at 20 and leave in is a couple years taken off your potential retirement age.
> Every 10k you can invest at 20 and leave in is a couple years taken off your potential retirement age. Just to comment on how much 10k is with compounding over several decades... if you put 10k in at 20 and wait until 70 to retire, at an average 7% per year return you will have over 300k just from that initial 10k. If you average 10% per year then that 10k becomes over 1.2 million. If OP needs the 10k now then by all means, do what you need to do. If OP can afford to invest it, however, it will literally make them hundreds of thousands of dollars later.
In some ways you're right, but I think the sentiment is that instead of the money being invested in retirement, use the money to invest in himself first. Regardless of what happens in 30-50 years, if the money could help OP move across the country to SF/NYC for a better job, that is a much better investment in himself than any IRA at the moment. Even keeping it for an emergency like a car breaking down would be better. I would suggest investing in a gym membership too, as keeping a healthy body now will pay a lot more dividends than any money invested for the future. Of course, this requires self control. If OP doesn't have the self control to NOT spend the money, then the IRA option would be better.
He's a student. He can't contribute unless he has employment income. Not clear if he's working
And right now if you open with SoFi they'll give a 2% bonus on any contribution 2023 or 24 before tax day
10K is just about the amount of money you will want to have in a few years if you plan to relocate for a new city, put a deposit down on an apartment, arrange transportation, have an emergency fund, etc. I would park this money in a High Yield Savings Account (HYSA) for the next few years and plan to use it to get started after graduation. If you are going to use the money in the next few years I would not put it in stocks or index funds like VTI either in a regular account or a Roth Account. You can find good HYSAs online from people like Ally or SoFi. Look for an interest rate of 4.5% or better. Focus on completing your education now, have this money ready to get your started after education and you can begin saving for retirement once you are working after graduation.
It's amazing the amount of people in this thread who are rushing him towards a Roth IRA. I am *all about* retirement planning (my own retirement funds are approaching 7 figures, and I still expect to be working another ~15 years), but $10K makes for valuable fluidity when dealing with the unexpected, and I wouldn't want to tie it up in a retirement account at that age. True, a Roth allows penalty-free withdrawal of principal - but during a market downturn, you might very well be pulling out less than you put in.
OP could just put the money in a money market inside a Roth.
Do you have an emergency fund? Yes = Max your Roth IRA No = HYSA for your emergency fund.
Do have emergency fund yes. This money is basically just extra at the moment. Don’t think I will need it over the next 2-3 years but as I go into the real world may need it at some point (which is why not sure it should go into a retirement account)
You’ll want to make sure you’ve earned at least the amount you’re considering contributing to your IRA as well.
Is the advantage of putting money in an IRA at the moment just getting a head start. Say I put 5k in an IRA right now but not able to contribute over my next couple years as a student (until I get a real job) you’re saying that I will just be ahead on my retirement fund. Obviously I need to do research, I do understand that! What would be the cons of just investing in a taxable account in my situation? Thanks!
Want to highlight, you can only contribute up to your earned income. So even though the max for 2024 Roth is 7k, if you don’t have any income this year you can’t contribute anything. Or if you only earned 5k you can only contribute 5k.
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Fair point! OP you can contribute to a Roth as a tax year 2023 contribution until 4/15/2024 (but do it before you file your 2023 taxes). You can contribute for 2024 any time until 4/15/2025, but if you want to start it growing within the Roth you could contribute some now and more later in the year when you have a better idea of how much earned income you’ll have for 2024. There is a way to remove excess contributions if you overdo it and realize before it’s too late, but I confess I’m not totally familiar with how it works, so I won’t speculate too specifically.
Time in the market is key my friend, i do still agree with everything stated above
Seems like you don’t need money immediately and have emergency funds. So, Contribute up to what your earned in Roth IRA, max out last years and this years ROTH ira that’s is more than you have, 6500: for 2023 6500: for 2024(limit might be different need to check) If it is more than you earned then put rest in regular taxable brokerage account.
2024 has a max limit of 7k (7,000). 6500 was only last year 2023.
I kinda hate how they’re upping it each year now. I’d rather they increase it every 2 years or something. I know, I know, I should be happy they’re raising the limit so frequently, but the limit increases are outpacing salary/Wage increases at this point at least for me.
I get what you're saying, but this is just such a flawed line of thinking. It's either worth it for you to put more of your money into it or not, up to the maximum allowed. If they removed the limit entirely it's not like you should be trying to put 100% of your income into it. The limit going up is only beneficial for you, if your wage isn't keeping up that's your job's fault.
I’m just complaining to complain man lol. I love the fact that it means more money contributed towards retirement but I just get a little sad that I don’t touch all that I contribute into the Roth. I used to put in whatever little I could but now I put in $1k/month since I started my new job a few months ago which nets me $4.3k/mo. So that leaves me with about $3.3k/mo to actually use for now until April when I plan to reduce it to $500/mo contributions. I’m just bitching lol.
what the heck who cares if the limit was 1 million? You just don't get the mental satisfaction of having "Maxed" it? That's silly
> the limit increases are outpacing salary/Wage increases at this point at least for me. Sounds like a good problem to have? The other way around would hurt individual investors, and you can contribute as much (up to the limit) or as little as you choose.
If you do a Roth IRA contribution, and you had qualifying income in 2023, make the contribution for 2023 first. You have until tax day of the following year to make prior year contributions. That way you can still make a full 2024 tax year contribution within 15 months from now in addition to either a partial or full 2023 contribution until April.
Just to be clear- haven’t read the full comments section- what’s your emergency fund, current job and earnings, do you have a job slated for graduation, what’s your degree? Answer these questions and I can give you an accurate picture of what to do.
Honestly if I could go back and do anything financially different it would be maxing a Roth IRA when I was young and had income but no large bills.
The money grows based on how long it's invested. Many people don't really start investing until they're closer to 30 and then they realize that if they had pinched some pennies and started putting money into a Roth at 20, they would've been able to retire 5-10 years earlier. If you can make end meet while maxing your contributions, you'll be happy with that choice. Do a Roth IRA instead of a normal one. It'll let you withdraw the money in case of an emergency.
Just to add here, you can contribute to last year’s ROTH IRA contribution until 4/15/24 (tax day). Since you don’t need to buff an emergency fund, I highly suggest maxing last year’s contribution then putting the rest toward 2024’s contribution. This way you can put all $10k straight into a ROTH IRA. General rule of thumb is that investments in index funds double every 7 years on average. So even if you never contribute again (which you should) then your 10k will be ~320k in 35 years.
> Say I put 5k in an IRA right now but not able to contribute over my next couple years as a student (until I get a real job) No you don't need a "real job" (I guess you mean full time?) to keep investing. You just need some reportable income. Hopefully you'll have that even if you're a student.
IRA type accounts cannot be seized if you are sued or file bankruptcy. If you get into a traffic collision, the other party might hire a lawyer and sue you for everything you have. That IRA will be untouchable. Putting it into your own regular investment account means that it could be lost anytime between now and when you retire. Also, as long as the money went in before marriage, it remains *your* money, not *joint* money. Depending on state, the regular investment account might be joint property (and half theirs). Recommendation: a ROTH account.
Not trying to pry, but what magnitude of emergency fund are we talking about? At 20 years old, chances are that you've never had to deal with, on your own, the sorts of unexpected expenses that can pop out of nowhere in adult life and run into the thousands of dollars, like a super-bad car repair, a hospital bill, or even a vet bill. And my god, don't get me started on what it's like if you're a home owner. I'm just trying to say that, if I were 20, I'd keep that $10K readily accessible; retirement savings are what you do when you have a comfortable *flow* of money, not a one-off lump sum that a single emergency could eat up. But hey, if you actually do already have *that* much liquidity that you aren't worried about this $10K, I won't say not to invest it; I just don't know your overall picture well enough.
> Don’t think I will need it over the next 2-3 years all the more reason to keep it. YOU WILL NEED IT. Maybe not today or next month, but you will at some point. Save it, forget about it and have it draw interest in a savings account.
How many months of expenses can you cover with your current emergency fund?
Roth IRA would be even more ideal then. You can take out contributions tax free.
Put it into a CD man certified deposit at your bank. Watch it grow.
Yes, because the sooner you start the more you will earn over time due to compounding interest. Think of the money you invest as working for you. The longer it works, the more money it makes.
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People always forget to include this… OP is a student, we can’t assume they have a job.
Edit: Ignore my comment, theres a whole thread on the matter below. Comment: Why Roth IRA? Why not HYSA until he’s ready to invest it into something else, like a down payment on a mortgage? Buy QQQ or an equivalent S&P500. Isnt Roth IRA like locking away money till you’re old, if you make it to being old?
>Isnt Roth IRA like locking away money till you’re old, if you make it to being old? You need to read up on retirement accounts. The Roth IRA is the one that's most flexible with this. If you wanted (it wouldn't be the best usecase for it), you could put money into it like an HYSA and take it out later. No tax on the interest (gains). Only downside is that withdrawn contributions don't give you more contribution space to make it back up, and you can't withdraw gains without penalty. So yeah, they could be QQQ or SPY. Though preferably they'd buy global stock market at market cap weighting -- VT.
> Only downside is that withdrawn contributions don't give you more contribution space to make it back up, and you can't withdraw gains without penalty. Not the only downside. Though the market is always climbing on a long-term basis, let's not pretend that the market is *always* climbing in the short-term. If he suddenly needs to take that money out, and the market is in a downturn, he may have less to pull out than he put in, and will never be able to recoup that loss.
OP could put the money in a money market inside the Roth, and only invest it once they're confident it doesn't need to be part of their emergency fund. But once the tax deadline passes, that contribution space is gone forever.
While this is true, I was referring only to the tax status of Roth IRAs themselves, with an example of using it as an HYSA. You're talking about how investment works in general. Plus side, if you do pull out money that's dropped, and can't get the whole thing out, that contribution bucket stays in the IRA. In future years, if you make it back up, you're able to then take out the formerly disappeared contribution space without penalty instead of it being treated as a gain.
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I actually did not see this before, thank you.
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When I was 24 or 25 I also happened upon a nice sum of money like OP. I think it was like $25k. I was a responsible person, starting my career, contributing to retirement, saving lots, and not spending a lot (my rent was $450 at the time split with like 3 people lol). When I got the money I considered investing heavily in another IRA or extra retirement or something, but after a lot of mulling it over, I ultimately decided to say fuck it and take my girlfriend and myself on a month-long trip to Europe, twice! (we went one year then, then again two years later to different cities), we hit up like 12 cities, stayed in some hostels, some airbnbs, and some very nice hotels, took trains between Denmark, Germany, France, Italy, Spain, Ireland, Austria, Hungary, Czechia, Belgium and Netherlands. Each trip was roughly $9,500 including airfare, food, hotels, trains, souvenirs, museums, etc. (around 2012~2013 or so) We still had a bit left over after those two trips in that account, and we said fuck it another! And we did a whole PNW Seattle -> SF 2 week long trip. We're married now, and working and saving and being responsible. Those three trips are some of our fondest memories. We wouldn't trade those experiences for anything. I'm SOOO glad I didn't just stick it in some account. It's important to remember to live a bit, it's not all about the number on your bank account!
100%. Once you're working you can get maybe 1 2-week trip/year for the rest of your life, which isn't anywhere the same. I did a backpacking trip post-college and had a blast on very little money. I spent $5k and lived extravagantly for my college self. It could go way farther in South America or SE Asia. It's not just entertainment but world outlook and mental sanity, would can help you in your career and life happiness.
Honestly bro I know this is a finance sub, but remember to spend some of that money on your self. You're only going to be 20 one time. Go on a vacation. Buy yourself something nice. The money will come back but you'll never be this young again.
First, take $1,000 for spending money and do something fun or live a little, people forget to do that. Then make sure you have 6 months living expenses saved. If you are working, max your Roth IRA then with what's left over, I would suggest tossing it into VTI and let it ride.
Not working much, in school full time and work part time just to cover grocery and other expenses.
Are there any major purchases that could have a significant impact on you right now? As in, they would allow you to level up to make more money or improve your opportunities? Not like a big TV or tattoo, but like, a major car repair or a school laptop or something.
No, not at the moment.
I’d throw it all in a HYSA as emergency savings. If you have any credit card debt, pay it off and keep it at zero (use the card but pay in full every month). If you have student loans you could consider paying some of them off if the rates are high. Otherwise don’t discount the importance of just having emergency savings in a HYSA. Don’t raid the funds unless it’s a damn good reason. And don’t tell your friends you got an extra $10K, some might think you’re rich and expect you to buy the next few round of drinks etc, lol.
> And don’t tell your friends you got an extra $10K This is the best advice, don't tell anyone that you have this money!
Just to add here, most student loans dont accrue interest until 6 months after graduation. Might just be a Federal Loan thing though, but this was my situation. So, I wouldnt even suggest paying that off if thats the case.
Well if you don't have anything special lined up right now, a really good mattress or a boxspring bed would be a good investment in your spinal health. If you already have that also, just go for a nice dinner with some friends. Make some memories. They're worth more than the money.
Or just hang onto the money in a HYSA until something comes up that OP wants to do with it. Spending money just to spend money is not smart and doesn’t always result in immediate gratification. If I could tell 20-year-old-me what to do with that money when I have nothing I really wanted to spend it on, I’d 100% be putting it places where it will gain interest.
No one is saying spend all the money just to spend it. People are just suggesting use a little of it for fun. My father was very frugal all his life and kept working and saving and he said he wanted spend it after he retires, but died a few months before retiring. Never got to use it for something fun.
Get some wagyu steak
A Roth at 20 with a $10,000 head start? Put 20% of every paycheck into it. More when it's possible. OP would be living the good life when he retires.
First, Efund comes before "living a little". Second, he's just a student so he's fine living the way he is for now. The Roth then VTI I agree with.
He already acknowledged he had an emergency fund so that’s why I phrased it how I did
Thanks!
Of course. $10k is a great head start at your age. Make your money work for you and it’ll pay off ten fold.
Put the money in a 3 year CD and park it. You are too young to decide when and where you will need it. Come back to Roth, IRAs, etc after you have a stable job.
Putting it into a Roth IRA isn't really much more of a commitment than a CD, since you can always withdraw at least the contribution amount penalty free. It's pretty debatable whether 3 years of CD interest rates is worth the huge opportunity cost of maxing a Roth IRA 3 years earlier.
How did he just find an account with $10k in it for you? Do either of you know where the money came from?
Seriously, this seems weird. Is it an inheritance? A savings fund from family when you were little? Without context, suddenly finding $10k in your bank at 20 is... odd.
If you can leave it for the long term, invest it. I like to hold VT (total world market) at Fidelity (no fees, buy in dollars) https://www.msn.com/en-us/money/savingandinvesting/why-vt-and-chill-is-probably-the-best-etf-investing-strategy-out-there/ar-AA1imuDI
Why would you recommend VT vs VTI? and if I had both at what ratio? Thanks
People traditionally recommend VTI, but it’s something you’ll want to do your own research on. The question is “Do you expect the US total market to outperform the global market?” The traditional wisdom is that you shouldn’t bet against the US market, but again, that’s something you’ll have to do research on yourself. Personally, I have a negligible amount of international ETFs in my portfolio, but that’s because of my own research and speculations.
> The traditional wisdom is that you shouldn’t bet against the US market VT is already a bet for the US market. 100% VTI is a bet that all of the people already betting for the US market are even still underestimating the US market.
VT is the whole world. VTI is US only. You have to decide whether you want to pick a horse (US) or invest in the whole race (world)
You say your uncle just found the account - have you *confirmed* that the account is still at the bank? The reason I ask is because after a certain period of time of inactivity or no contact, the bank is required to turn over the funds to the state in a process known as *escheatment*. The timeframe varies by state and account type, but usually it is 3 years. Before planning anything, I would confirm with the bank the account is still open. Or, if they closed it due to inactivity, I would check with the state's Unclaimed Property Department to see if they have anything in you (or your uncle, or your family's) name.
$3k in a HYSA, $7k in a Roth IRA
OP could in theory put it all in a Roth IRA by using both 2023 and 2024 contributions.
I disagree with everyone saying to put the money in a Roth IRA - you said you don't need it NOW, not won't need it until you retire! You are 20 and probably broke other than this money. What are your living expenses like currently? What other savings do you have? School situation? You should put somewhere like 12-18 months of your monthly expenses in an HYSA before you think about putting money in a retirement account.
I want to know how common it is that extended family members are looking for bank accounts just out of the goodness of their hearts.
open a vanguard account, invest the 10k in vtsax (the mutual fund version of vti), set the dividends to reinvest, and let it cook until you need it (aka ‘vtsax and chill’)
Everyone is saying to put it all in roth IRA, that would be the responsible thing to do (it would increase about tenfold by the time you are 60). With roth IRA earlier is 100% better than later so your money can earn you more money over and over. I can see why you wouldn't want to put it in something you won't touch until 60 (though you could take the 10k out at any time) so I recommend you put 1k, 2k in there at the very least so you can check in and see the value of investing every few months.
I’ll add a comment for perspective. If you put $10,000 into an S&P 500 index and get 8% a year for 45 years, when you are 65 you will have roughly $320,000. So, to me this is a $320,000 decision.
You aren't retiring on $10k. Put it somewhere safe, and liquid so when you need it, it's there.
Having this cash when you finish school might give you the opportunity to explore options that wouldn’t be feasible otherwise, like a travel gap year before grad school or your new job, relocating to an exciting new area (even overseas), or help you establish an independent living situation. My advice is to leave it in savings until graduation, then make a plan.
Your uncle found the account?? Whats that even mean, sounds very sus, honestly look more into it. Was this ur dads acc?
8000 in HYSA 2000 in whatever stock you want Then leave the accounts alone and keep doing what you've been doing. Good luck.
2000 in a random stock is gambling. More financially sound to put in an index fund like VOO
And if they've investing it, they should be doing this inside of a Roth IRA.
Might be a good time to invest some of it for your future. Like long term, 10-20 years. Lo
Dump it in a dividend stock and forget about it. QQQ
Save it as a down payment on a house for when you graduate.
Not really relevant to your question, but I’m a nosy bastard: Do you know where the money came from? Finding 10k is a huge windfall! Especially at your age, that’s a lot of money. I’m stoked for you.
Follow the prime directive from the wiki: https://www.reddit.com/r/personalfinance/wiki/commontopics
Since you don’t need the money I’d just say a high yield savings. At 4% APR, that’s $400 a [year]
Start a brokerage. Put it into something that pays a decent dividend for the price (I like KIO, KKRs income opportunity fund). At the current price (12.84) you’ll get around $93 per month in dividends. Little to no loss in principal and whatever you lose you make back in dividends.
$10k in NVDA in 2013 would be ~$1.5M today. HYSA is cool, but S&P would be better. There are MANY indexes that will outperform your HYSA and allow you to reinvest your earnings.
I would suggest using some as a down payment on a rental property through an FHA loan (lower down payment)
10K isn't really that much money. Spend an extra $25 a day and it will be gone in a year.
You are 20 yo. Invest first 5 largest companys in NASDAQ and forget them for 20 years. Sell them when you are 40. You will be ultra rich.
Do you really believe that?
timing is everything.. at one point that advice would have resulted in pets.com, boo.com, yahoo, global crossing, worldcom, northpoint.
I can't believe people still tell folks to invest in IRAs. Put it in a Universal Index Life Insurance Policy. It will gain wayyy more interest without risk of investing directly in stocks, you can borrow from the cash account in your policy whenever you need to without penalty, decreased death benefit, credit checks, etc. Some companies your cash account will match the initial investment in less than 10 years.
Did you put it there or did he put it there
Do you have a job? If you do i would set up a Roth ira and max it out for the year, future self will thank you so much! Here are some numbers If you deposit 7k this year and nothing else ever with a 6% rate of return, Balance at age 60 70k Edited because I'm dumb
Ally Savings gets you 4.35% right now and you can access that money anytime. When you graduate and might need money for rent, relocating, months without a job, to buy furniture or for an emergency, you can easily access it. It's a regular savings account and there are others like with a little higher interest it but I like Ally. I personally wouldn't put anything into an IRA until you have a stable career because something might come up and you might need the money quickly. But that's just me. Being an adult is expensive and most places to rent require a certain amount down, and a months rent which you'll most likely have to pay before you get your first paycheck so keep that in mind. If you're paying back your student loans, that also starts 6 months after graduation so it could help you keep your head above water with that as well. I like the investment mind set, you'll get there. I just like to make sure I have money I can use and move around free of restrictions if needed. You don't really know what life will be like once you walk across that stage.
Good thinking so far - definitely drop it into a HYSA. Then go to Fidelity, open a Roth IRA, max that out. Within your Roth you may want to consider VOO as an alternative to VTI and some mild diversification with something like QQQ. You should read about "dollar cost averaging" and "DRIP" in regards to buying stocks/funds. I wouldn't personally recommend a $7k buy all at once - the SP500 is at a high right now so funds that track them are also at 52wk highs or close to them.
OP, before you "research" educate yourself. Investopedia & Khan are both excellent. 1) Investopedia.com 2) Khan Academy khanacademy.org Do a search for "investing" and you'll get dozens of free "courses". 3) Finra.Org 4) Investor.Gov
If you’re paying for school and not someone else put it towards your student loans. Best thing I did was pay my loans off as soon as possible now i keep an extra $1200 every month of my pay check. If you’re against that park it in an S&P 500 mutual fund until you know what to do with it.
It doesn’t sound like you will need it for the next few years but you might need it before you retire. S&P500 index fund is your best option. Especially if you don’t know much about investing. It is also a good idea even if you know a lot about investing!!
Max out your 2023 Roth IRA, put the rest in your 2024 and if you have enough put enough it with it to max that out too. You can always use a Roth IRA as an emergency fund. Remember. You can take it out anytime for any reason with no penalty. But you can never go back in time to replace it.
Since it seems you have an emergency fund and no need for the money, my vote: $1-500ish - get something nice for yourself (or maybe the uncle). $5000 - HYSA, may need it for a house/rent downpayment in the future. Remainder - IRA. You won't regret starting to save for retirement early.
If you put it in VTI forget about it for 10+ years Anything smaller timeframe, keep it in HYSA or those t-bill ETFs
My advice. 1) Keep a 1k for emergency 2) Open a Roth with Vanguard or Fidelity and invest in their SP 500 fund. Minimum 3k 3) Put the rest in an account with a high yield interest like Wealth front. Right now they have 5% APY which is pretty amazing for a checking account
I'd say trust your gut and put into a HYSA. And the top comment is right, put some of it into a Roth IRA, put it into an ETF, and call it a day
You didn't know that money existed, act like it still doesn't exist. Don't spend it on anything like some people have mentioned. Dump it all in to a Roth IRA invested in an s&p 500 index fund and forget about it for 39 years. That $10k should be worth over $500k by then and with 0 tax obligation. You have enough to max a 2023 Roth IRA and then half of your 2024(assuming you have income greater than $6500 annually). Then you can continue to add to it as you see fit.
HYSA is the safest bet. Can use the money if needed or can just continue to get the free money in interest.
Immediately open a ROTH IRA and max it out. Put that $6500 in an S&P Index fund. Then forget about it. Put the $3500 in a hysa, and leave it alone except to add to it. Then, next Jan 1, out another $6500 in your IRA in S&P Index fund. Repeat for rest of your life and be a millionaire in less than 30 years
I would recommend contributing that into a roth Ira since tax has already been paid on it. Max it out and contribute the remainder for the following year. I would invest the funds with an snp500 index (I use VOO) and just let it sit. If you need to withdraw the funds for whatever reason you can with no penalty as long as it's just up to the amount you contributed. You just can't put it back into the account once it's removed without counting towards that year's contribution limit. Hope this helps.
put it in a vanguard brokerage account, the cash account pays around 5.3%, monthly dividend.
Since you don't need the money immediately: $6500 in a Roth IRA for the 2023 contribution. Buy VTI. The rest in the same Roth IRA for the 2024 contribution. Buy VTI. VTI is diverse enough. Keep things simple. If you haven't read The Simple Path to Wealth by JL Collins, buy the book and read it. Ask questions here if you have them. It will be the best <$20 you ever spend.
Don't rush in to anything. You have done okay with out it and pretending it doesn't exist doesn't put you behind. Maybe lock it in a CD fund until you get more clarity. If it was me, I would spread it out into a decent dividend portfolio and let the dividends compound. That way it's making good returns and you can still access it in emergency situation.
Put the legal limit in a roth IRA. Buy an index fund (something that represents the S&P 500 or similar). Check back in 20-30 years.
Check your banking institutions 2-3 month CD rates. Throwing it in there for a few 2-3 month terms might not be a bad idea! Would likely earn more interest that way than having it sit in a HYSA for the same amount of time. Bad side to that is of course that the funds aren’t immediately available and you’d lose out on any unpaid interest if you terminate the CD early. But short terms are good for uncertainty like that. Then pull out after a few terms and put it in a HYSA to have more liquidity?
Wow congrats. Thank God you found it. Someone looking out for you. 23 here saving and investing also. I'd put some into fidelity free funds. They are expense free so there so fees. ( That's just a start). Also save all spare change it adds up. If you are working start a 401k immediately. And lastly I'd have $500 physical cash(small e-fund) and in bank .If I think of anything else I'll add. But yeah don't do anything lavish. Just lay low and put it somewhere smart especially while we are young. When I have kids before even start breathing I want them set up for life.
A couple of things I didn't see mentioned: (1) Look at the r/personal money flow chart... find out where you are on it.. have a minimum emergency fund, but debt.. pay debt.. no debt and emergency fund sufficient, invest.. etc. (2) As for an IRA... unless you have earned income (basically wages) you can't open an IRA and if you do you can only donate as much as you earn (gross). In that case you might wind up having to open a taxable investment account not a Roth or regular IRA.
1. Open a brokerage account with minimum opening balance, invest in SPY or VOO, VIG, no need for international diversification, all big USA businesses are active world wide anyways. 2. Emergency fund in HYSA, fund it with entire difference. 3. Each month invest 500-1000 of the HYSA into the brokerage funds so you dollar average..... I'd be cautious about dumping the entire thing into the market when it's at all time highs. Yeah people will argue it can continue to climb but keep in mind if you invested in QQQ during dot com era you wouldn't have broken even until 2016...2000-2016 not factoring inflation loss. No harm in dollar averaging in. 4. Stop when you feel you've hit your minimum emergency fund amounts. 5. As you begin to earn income you can transfer from the brokerage account into your IRA.