Saving money during college?

[antiver]

I'm going to have about $10,000 by the time I leave college (and I currently have zero debt), and I don't want to have it idly sitting in a checking account. I'm looking for a simple way to earn interest / invest / etc. I'd like to do some day trading during the summer, but I don't feel like I have enough to make it worthwhile after all the trading fees. I've also looked at opening a regular savings account (Capital One?) but I'm hoping maybe there's some more options that I should be considering. Note that I'd like to have relatively easy access to it if I need it, since its pretty much all the money I've got :P

[Daylily]

If it is all the money you have, then stay away from day trading.

How soon will you be finishing college? Have you looked into an online account? Have you thought about CD-laddering? It sounds that you'd like to keep this money in something with little risk.

Do you have earned income? How about putting a bit into a Roth IRA each year?

[jganem]

I would stay away from day trading. That is not much different than gambling. College passes much quicker than you realize and establishing yourself when you leave can take quite a bit of cash. You might have to move to a new city, put a deposit on an apartment, buy furniture, etc. I would shop online for the highest money market rate you can find and park the money until you graduate. These days, you won’t earn much in interest, but at least you’ll have the cash waiting to help establish yourself once you graduate.

[disneysteve]

What is the money from?
What is the money for?
When will you be needing it?

If it is earned income, consider putting at least some in a Roth IRA.

If the money will be needed in the near future, less than 5 years, stay out of the stock market. Stick to a high yield money market and/or CDs.

As for day trading, I'm going to go against the grain here. I think the only real way to learn about the stock market is to experience it first hand. Take a small amount, maybe 10% or your stash or $1,000, and open an account with a discount broker like Scottrade. Play around a little buying and selling. Just don't get greedy and don't get stupid. You'll learn quickly enough why day trading is a losing game. Get it out of your system and then you can move on to real investing. Better to learn the lesson now.

[sweeps]

http://www.savingadvice.com/forums/investing-banking/19240-online-savings-accounts-current-rates.html

[sm808]

I'm in college as well and I agree w/ Steve here. I would put $9,000 in a safe online savings account and not even look at it expect to see your statments each month. Put 1k in a discount online brokerage and see what happens - don't "daytrade" per say, but pick a few companies, taht interest you and do your research. Remember that good company does not always equal good stock. Invest in what you know, understand, and like, and enjoy! Good luck!

[disneysteve]

Put 1k in a discount online brokerage and see what happens - don't "daytrade" per say

Everyone around here knows I'm pretty conservative and level-headed but I say go ahead and day trade. Most of us who are interested in the market have done it at one time or another or at least thought about doing it. Until you do it and lose your stake, you will continue to think that it is the path to easy money like you see on TV. So take $1,000 and have fun. Maybe you'll make a few bucks. Maybe you'll lose $1,000. But you'll learn some valuable lessons in the process.

[anonymous_saver]

This is what I would do, I would open up an IRA with the minimum required, at Vanguard. With the rest of the money I would set aside in a high interest online savings account that you wouldn't touch unless there is an emergency in the next couple of years. Then when you graduate, you would be in a very good situation.

Are you taking out loans for school? You should think of getting a credit card that you pay off each month (I'd suggest making only 1 purchase each month that you can pay off in full). This would allow you to start building credit so that when you graduate, you would be in a better position to get a mortgage down the road.

Oh, and don't do the daytrading!!!

[Like2Plan]

I have always been curious about folks who Day Trade and taxes.

If a person made just 2 transactions each day that the market is open--wouldn't that amount to about 250 transactions that you would have to report on your taxes? Any gain would be presumable short term which isn't it taxed the same as ordinary income?

I would think the record keeping would be a nightmare.

[disneysteve]

I have always been curious about folks who Day Trade and taxes.

If a person made just 2 transactions each day that the market is open--wouldn't that amount to about 250 transactions that you would have to report on your taxes? Any gain would be presumable short term which isn't it taxed the same as ordinary income?

I would think the record keeping would be a nightmare.

Yes, every sale is a taxable event, either a taxable gain or a deductible loss. When I went through a brief stint of trading, I didn't make that many transactions so it wasn't a big deal.

[Bruce Wayne]

Remember that stocks can go down as well as up. If you're prepared to take that risk then investing could be an option, but if you aren't prepared to see your money dwindle putting it in a safe place would be best.

[kork13]

I just graduated college in May, and have about the same in various saving bodies. Primarily, I'd say put a good portion into a good online savings account to give yourself some security. I use ING Direct, there are a bunch of other options giving at least 3% interest at the link sweeps put above. With most of the rest, I'd put it in an IRA if you can, or in regular mutual funds with a company you trust.

As for the day trading, i'm with some of the others... take some of your money ($500-$1000) and try it out. i've considered doing it, but personally don't want to bother with the hassle or the risk. but like has been mentioned, it's probably worth getting some familiarity with it, as it could be helpful in other ways, including getting a better understanding of how the market works.

as a minor side-note, as was mentioned earlier, do what you can to build your credit before you graduate. it helps ALOT--finding apartments, getting insurance, getting a job, buying a car, and so on... all of those things generally involve someone looking into your credit history, and a good credit history can help you alot. My good credit helped me secure a place for myself and my roommates, and gets me better rates on my car insurance.

[disneysteve]

Regarding the day trading, keep in mind that you really can't do it seriously with a small amount of money. Folks who day trade big time are able to take advantage of small price changes because they buy large numbers of shares.

For example, if you buy 100 shares of stock and the price rises $.25, you are up $25 but have to pay $14 in commissions ($7 to buy, $7 to sell) netting you just $11, hardly worth the trouble. But if you bought 1,000 shares and paid the same $7 commission, that $.25 gain becomes $250 and your profit becomes $236. But you can't buy 1,000 shares of stock if you are only playing with $1,000 total.