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Where should I put my money?

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Anonymous
Not applicable

Where should I put my money?

Hello all, I just started working a little over a year ago. I was able to save up around $9,000 that is currently wasting away in a checking account (I have Wells Fargo so I'm not going to waste my time with their savings accounts). I have thought about putting it into a CD account, however the fact that I can't add to it and don't have access to it for over a year or more has turned me away. Recently I've been looking into a Discover savings account with a 2.10% APY. Investing it is probably the most obvious option but I have no experience nor knowledge in that field and don't know where to start. The risk involved is also what has kept me away. I have been trying to figure out the best place to put it and would love some opinions. 

 

Message 1 of 27
26 REPLIES 26
pinkandgrey
Senior Contributor

Re: Where should I put my money?

I’m no financial guru, but FWIW I have a Disco Savings and it’s great. Easy to get started, easy to add funds... Amex also has a decent high-yield but as of yet there’s no mobile check deposit feature... 

Discover It: 21.5k
Amex Cash Magnet: 18k
Fidelity Visa: 16.5k
Apple Card: 4.25k
Message 2 of 27
Fico82
Frequent Contributor

Re: Where should I put my money?

I'm in the same boat as you. After becoming debt free i wanted to start saving for my house downpayment , and after noticing that my local bank pays 0.10% i decided to look around. I went with discover at that time they were offering 1.3% and since then has risen. If you want a low risk investing type situation i would recommend discover savings. Customer service , there app and use of transferring money is 100% excellent in my opinion.






Message 3 of 27
SouthJamaica
Mega Contributor

Re: Where should I put my money?


@Anonymous wrote:

Hello all, I just started working a little over a year ago. I was able to save up around $9,000 that is currently wasting away in a checking account (I have Wells Fargo so I'm not going to waste my time with their savings accounts). I have thought about putting it into a CD account, however the fact that I can't add to it and don't have access to it for over a year or more has turned me away. Recently I've been looking into a Discover savings account with a 2.10% APY. Investing it is probably the most obvious option but I have no experience nor knowledge in that field and don't know where to start. The risk involved is also what has kept me away. I have been trying to figure out the best place to put it and would love some opinions. 

 


If the most important things for you are (a) safety and (b) ease of access you should put it in a savings account at a bank or credit union. Some people want access to a branch, some don't care about that.


Total revolving limits 657200 (536700 reporting) FICO 8: EQ 712 TU 710 EX 708

Message 4 of 27
Anonymous
Not applicable

Re: Where should I put my money?

Saving for a house is fine.  Saving for a house downpayment is not which means you will spend more money on interest payments.  Putting funds in savings to take a mortgage later on is essentially giving the banks profit on the savings account which are low rates to begin with as well as the bank taking in even more money on total mortgage interest plus added fees.  If you are intent of going down this route, you might as well put all your funds in a big bank with full relationship benefits including lower mortgage interest rates which does large volumes.  

Message 5 of 27
Anonymous
Not applicable

Re: Where should I put my money?

I like Discover for just letting it sit there collecting interest. There are of course others with a higher rate, but the had a cool $150 bonus for opening anew account.

I also like NFCU for the easy start certificate because you can add to it, where as CD's you cannot. It also comes with a $100 bonus for opening a new account. 

Message 6 of 27
Anonymous
Not applicable

Re: Where should I put my money?

Discover Savings, ftw.
For every reason mentioned. I could not give a more sparkling endorsement.
Message 7 of 27
Kree
Established Contributor

Re: Where should I put my money?

It is often recommended that you do not invest money until you have 3-6 months worth of expenses in a easily accessible account, such as savings.

 

 

Message 8 of 27
Anonymous
Not applicable

Re: Where should I put my money?

Congrats for saving money!  Good for you.

 

My advice is to do three things:

 

(1)  Find an online savings account with a competitive rate.  There are many options.  Discover is one.  Since you seem to really like it, go for it.

 

(2)  Begin learning about investing.  A great book (that is available for free online) is IF YOU CAN by William Bernstein.  It is short, designed for young investors like you, and is easy to understand and very sound.

 

(3)  Consider opening a Roth IRA.  You can do this using the $5500 limit from 2018 as long as you do this by April 15.  You do not need to invest the money in anything risky right away.  You just want to meet the April 15 deadline.

 

Message 9 of 27
Anonymous
Not applicable

Re: Where should I put my money?

Hello Bruuzu,

 

I saw in another thread that you're 19. It's really impressive to have the discipline to save that kind of money at that age. With that discipline and the other qualities you're showing here, you have a bright future.

 

Here are a couple of thoughts:

 

1. I assume you don't have any debt. If you do pay it off. It's unlikely any safe investment is going to pay you what the debt is going to cost you. But beyond that, the freedom and flexibility of not having debt is a significant advantage.

 

2. I heard an interview with Mark Cuban (Dallas Mavericks owner, Shark Tank personality) a few years ago. In that interview, he answered exactly this question: Where should someone invest who doesn't have the millions to attract the big deals? I thought his response was brilliant, if not exactly the exciting, sexy approach everyone is hoping for,

 

He said you're far better using your money to leverage your buying power for things you need anyway. For instance, if you buy a year's worth of toothpaste at Costco and can save 40% on what you'd spend buying a tube at a time at the grocery store, you're going to be way ahead of taking that same money and investing it anywhere else. There's nowhere safe that you can anticipate making 40% a year on your money. (And actually, if you spend $.60 to get $1.00 of value, you're actually getting a return of 67%, not just 40%). But you can only do that if you have the cash in reserve to afford it. There are a lot of things that you buy that you can do that with. And there are other things (perhaps a car?) that you can negotiate a better deal if you can offer cash. It's not always the case for a car, because many dealerships what to finance it and then sell the loan, or they get a kickback from the lender for making the loan, but there are things, large and small, where you can get a cash discount.

 

3. Consider your long-term goals. Do you want a house? You generally need at least 5% down, so depending on what part of the country you live you might alread be close -- although if you can get to 10% or even 20%, all the better. Even if you live in a more expensive part of the country, at the rate you save, you can get there fast (and by fast, I mean a few years).

 

If a house is your goal, you don't want to tie your money up in a way that it's difficult (or costly) to get it back out or in a way that has the potential of for short-term losses that would set your plans back. In that case, 2.10% (and using the money like I suggested in #2) isn't a bad way to go.

 

4. CreditGuyinDixie's advice it open an IRA is solid. If you're not looking to buy a home in the next 5 or 10 years, then I'd agree with him to make the whole $5500 contribution to an IRA for 2018 (which, as he said, you can do until April 15, 2019). I would open a self-directed IRA with somewhere like TDAmeritrade and then use the funds in your IRA to buy Exchange Traded Funds (ETFs). An ETF is a fund that you pay into, and then the fund manager buys a broad range of stocks (or bonds or real estate or whatever kind of ETF it is). It's similar to a mutual fund, but is much easier to trade.

 

For instance, Vanguard Total Stock Market Index (VTI) is an ETF that owns a broad range of domestic (American) stocks. It closed at $134.90 today, which was up $1.08 or 0.81%. It is usually going to roughly follow the DOW (which was up 0.67% today) or the S&P500 (which was up 0.76% today). Just like the DOW, it's going to go up and down, but if you own it from now until you retire in 40 years or so... well, there are no guaratees in life, but 40 years ago in 1979, the DOW was around 3000, so it's up around 8000% for that period of time. It's about as safe a long-term bet as there is (probably even safer than a house -- but then, you can't live in an ETF).

 

Because an ETF spreads your investment over a lot of different stocks (or bonds, commodities, real estate, etc.), you're never going to see the astronomical short-term gains that you would have if you'd have bought Apple in 2000 or something like that. But unlikely to see major crashes either (at least, not more than the DOW). And VTI is offered commision free on TDAmeritrade, so you don't have that cost up front.

 

I just mean that as an example. I'm not guaranteeing anything. And, full disclosure, I do have a reasonable portion of my IRA invested in VTI.

 

Anyway, that's my 2 cents. More than I intended to write, but good luck to you!

Message 10 of 27
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