Money

I'm in a position right now where my finances are pretty decent, and I'm building up a nice little amount of money in my savings account (around $5000 right now, which I realize might not be much to some out there). I know next to nothing about making my money "work for me," so I'm kind of wondering if just leaving it in my saving account to bring in a small amount of interest is the best thing to do. (I actually need to look into the different savings accounts my bank offers, though, because when I opened the account I didn't have much in there, so I might be able to get it into a higher level one.)

Like I said, I know next to nothing about investing and IRAs and CDs and whatnot, so for those of you who do, what recommendations would you have? I think by the time I get to a point where I won't be able to stash as much away every month, I might be up to around $10k in savings. The problem is, though, I'm a bit hesitant to put that money into anything long term, because I'm not financially secure enough that I can stash that money away knowing I won't have any need to touch it. I might need it, or at least part of it, so I don't really want to put it into something that I can't touch for some time.

Do I have any options at all, or is it basically a savings account and not much else unless I can put it away for a while?

GICs are generally better than a savings account, but not by much.
Mutual funds might be a better option, although there is some risk involved, especially with the more profitable ones.
I've got about CDN$7000 in my checking account right now that I could invest too, but I'm pretty sure that'll be my rent and groceries for the next 6 months instead.

I have a Utility fund my Grandmother opened when I was 18. The initial investment was only $100, but in the 20 years since she opened it, it has increased to about $1500. Not a bad investment of $100 and I could only imagine what a $500 investment would be worth today.

I don't know much either, but I hear government bonds are incredibly safe and liquid. gotta be better than letting it rot in a bank account.

I have Mutual Funds and IRAs. I have over $10,000 worth in IRAs (I think. I have to see statements). I have about $2,700 in my bank account now. Coming from a college student (for the past 6 years) and someone who only works 8 hours (1 day - $90 after taxes), thats pretty damn good.

If I can, I'll let you know which ones I have invested in. I suggest you go talk to your bank and ask for advice. I'm through Citibank.

If you want low risk but better than savings account returns, I'd look into CDs. They can typically return a decent percentage in a few months. It's basically giving the bank a loan and having them return the principle with interest in X months.

Another point that people often overlook is that if you have any credit card debt, you are better off paying that off before you do anything else. You won't get a 20% return anywhere, which is what you are losing to the credit card if you have one.

Yep listen to Yoshi. Im not too flexible myself but my financials have gotten so much better in the short amount of time Ive been working. The only things I have now are a 401(k) I started last October, a Orange Savings Account, and... lots of student loan debt. :cry:

IRAs are long term (Investment Retirement Account), so you probably want to stay away from that if you want short term. BUT... do the math on investing for retirement. The earlier someone puts in money, any amount of money, the better. I've read articles where a theoretical person put X amount of money in the bank from 20-29 and then didnt touch it until they were 65. They had more money than someone who put in 1.5*X from 30-65. Compound interest is the most powerful force in the universe.

I recommend picking up one of those "Personal Finance For Dummies" books, they're written for noobs like you. There's also some good PF weblogs out there, www.pfblog.com is decent, a lot of people write anonymously and open up all their financial details to the world.

edit: I will also say you should have a stash of money (anywhere from $1000 to 3-6 months of expenses) readily available in case of emergencies. That way you can use that money if something pops up instead of putting it on a credit card. I have money for that purpose, it really came in handy when I got a flat tire.

Think about putting something away for retirement, because the more you work on that now the less you have to worry about when you're too old or too sick to work. That's why I'd think about setting up a Roth IRA.

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Originally Posted by shidoshi

I'm kind of wondering if just leaving it in my saving account to bring in a small amount of interest is the best thing to do.

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Everything is better than a savings account. Everything. You'll never make a dime off it. Okay, maybe a dime. But it'll take a while.

There is honestly no reason on Earth to have one. At this stage they're seriously just a trick by the banks so they can play with Grandma's money themselves rather than her putting it into more specific investments.

A savings account is a good way to force savings, like have it automatically deduct from your bank account once a month.

Its better than nothing... but there are lots of better options.