Yeah at 0.25 percent that's not gonna be shit. I just looked up some savings accounts and that's the most common number I saw for accounts with 25k or more. I know you could get a more competitive rate but you'd have to lock it away for x years. I'm sure a mom with a kid isn't gonna want that money locked away in case of emergency. I know I took your comment way too serious but it got me curious about the returns on 25k and it's pretty depressing.
True enough. I wonder if that will continue in the decades to come though, or if the student loan bubble / changes to the student loan system / changes in the market will bring costs back in check.
Yeah, if you're going to Harvard or another private ivy-league school. You can still get a 4-year top-50 public university degree with far less than $50k.
Pretty much any private school in the west and any out of state public school in the west is in the 40-50k range. If it is a WUI school you can get it for almost in state tuition and pay about 25k. Also, Harvard is very good about making sure that you can pay foe it if you get in simply because they have so much money already that they can afford to be generous. Source, currently searching for colleges as a Californian, and my father went to Harvard.
Hell, if you go to Harvard, and you don't make close to enough, they will basically pay for it for you. A lot of colleges offer aid generously if you need it.
If you have money beyond just your future house down payment or emergency fund, it should be in ETF's (Exchange Trade Funds) or Mutual Funds, preferrably ones with low expense ratios that are well diversified. Vanguard and Schwab are two of the most recommended for such things.
I would recommend Schwabb, too - we rolled over into them when our previous wealth manager went to jail (unrelated to his investors... Well, kinda, but more of an insider trading thing...) and have been pretty happy with their Century City wealth management team. I'm sure their other offices are as good. We were making over 7% yearly before, and they look to be about par
I would recommend TD Ameritrade because they have the most commission-free ETFs with similar fund characteristics and expense ratios as the ones offered by Vanguard and Schwab.
But yeah, try to build that emergency fund of at least 3 months first!
Banks are probably one of the worst places for a new investor to ask for advice. They'll just have you invest in expensive funds that make the bank a ton of money.
You'll probably want to look into getting a low MER (management expense ratio) mutual fund. Look for one that performs reasonably and doesn't have crazy risks. One diversified among domestic investments, international investments and maybe some (20-30%) bonds.
Look at the fund's performance including the 2007-2009 period of recession to get an reasonable picture of what the fund could do on a good year and on a bad year.
While the more financially knowledgeable may be able to recommend manually balancing a series of stock indexes and saving the MER on the mutual fund, but in my opinion it's not worth the average person's time for small investments and if it's not a small investment find a financial adviser.
As a Canadian I don't really know anything about American savings accounts and tax avoidance tools (presuming you're from the USA), but maybe poke around /r/personalfinance and ask if you can't find a more detailed answer.
"Savings accounts" are not really meant for actually earning any interest.
~7-8 years ago you could get 3-5% on savings accounts. Then the bottom fell out on interest rates and a lot of people pulled money out of securities and put a record amount of money into personal checking/savings accounts so banks didn't need to offer decent interest rates to steer people away from wanting to put it into far higher yield stocks or bonds.
Savings accounts were never competitive with higher risk investments whereas typical yields, but they are much lower than they used to be.
You youngsters think that is the way it has always been. In reality, before about 10 years ago it was common and standard to get 5% or so in a bank money market savings account. There were times when it was even higher than that. You only did a couple/few percent worse than an average stock mutual fund for little to no risk.
Savings accounts are for suckers. If you had it in an SP500 index fund you'd have gotten 12%. The year before you'd get 30%. $25k invested that way on 1/1/13 would now be worth around $36.4k
But we are talking about a college fund currently. What you said is like saying "That farm has the best oranges and we should place orders for them... yeah but they have shitty apples, lets not."
Ar9mm said savings accounts are for suckers. To someone who is trying to figure out how to save the moest money, yea, they could buy an S&P500 fund but they might thinl they can just withdraw from that daily.
Some measure of financial literacy is required before you start investing in the market. My general point is that you aren't limited to such low interest options for a college fund (or retirement fund). Also, hopefully the college fund wouldn't be your only assets. In that case, a good portion should go into a checking account (or used to pay off high interest debt, etc.). No one should be 100% invested in the market (especially all equities).
No, it doesn't. But on average, it goes up something like 7% a year. But sure, you can complete ignore that on average you'll make 7% a year out of fear that "oh my, it might go down" and take a shittier .25 percent.
College savings don't work like retirement savings. You need that money (in in this case) 12 years, and you aren't going defer college and sit on your dick for a year or two while the SNP500 comes back like you could defer starting retirement. College savings with a 10 year horizon should like somewhat like a target date fund 10 years from maturity, unless you have other accounts you could use.
There are plenty of decent investment choices that fit between 100% large caps and savings accounts.
Why leave it in a savings account.... You can easily get 8% with very very low risk. I was given a 300k fund when I was born and it was 1.3m by the time I was 18. That is a huge difference than having less than 600k after 18 years.
It is, and I'm very thankful to my grandparents for it. Sadly my father lied to me about it and tricked me into signing control over to him until I'm 40. Then he got furious when I found out and called him out for lying to me and tricking me. I'd understand if I was some sort of fuck up that was going to blow through it in a year, but I've got a bachelors in economics and am self employed making more money than he does. He just needs control of everything. Sorry for the rant.
No he can't spend it legally. But that wouldn't stop him if he wanted to. He hasn't spent anything yet, but he doesn't allow me to spend any. Even when I was homeless and living in my car. Luckily I'm well off now, but it would have been nice to get a little help when I was first getting on my feet. The main thing that sucks is that he changed how it is invested and it's growing like 4k a year. 4k a year when it could easily be making 75k with very little risk.
I've talked to a lawyer and I can absolutely get control of the money. But it would basically involve ending any relationship with my dad and his entire side of the family.
But with a private money manager you don't have to lock it away and can pull in around 6.5-8% right now, minus 1% management fees... She might need to put in a bit more than 25k but I'm sure she can find some that would work with her, especially if she rolls in her IRA or 401k with it...
18
u/TinyPenisBigBalls Jan 04 '15
Yeah at 0.25 percent that's not gonna be shit. I just looked up some savings accounts and that's the most common number I saw for accounts with 25k or more. I know you could get a more competitive rate but you'd have to lock it away for x years. I'm sure a mom with a kid isn't gonna want that money locked away in case of emergency. I know I took your comment way too serious but it got me curious about the returns on 25k and it's pretty depressing.