Aaron is a fresh college graduate who wants to know where to put his money. He writes:
WooHoo! I got a job! Right out of college and everything. With an awesome sign-on bonus! Now what am I supposed to do with all this money? I know I have options. Stock Market (HA!), bank, and under my pillow. I would put it in the bank but I have a wedding coming up in less then a year to pay for and I want to know my options for making good quick investments. Please help!
Here’s what I say:
Since you need the money so quickly, what you need to do is preserve your capital and get a little interest to boot. Your best bet is probably a 6-12 month CD from an FDIC-insured bank, depending on how soon you’ll need the money for the wedding. Remember that a CD has a set maturation period and there’s a penalty for early-withdrawal. So figure out when you need the money and get the CD timed accordingly. You can find which bank has got the best rates at bankrate.com.
Does your company offer a 401k and match contributions? You’ll probably want to sign up, but be sure to find out about the expense ratios and fees first, not to mention if you have to be working there for a while before starting one. If there’s no matching contributions on the 401k or the expense ratios and fees are a ripoff, then start a Roth IRA.
Start an index fund from a place like Vanguard. Even if you just put a little in there right now, you’ll want to get these things going as early as possible. After you get your wedding expenses figured out and spoken for, use the remainder to pay off any debts you may have. After that, get a high-yield online savings account and save up 6 months worth of expenses. Then fully fund your Roth. Still got money leftover? Throw the rest in your index fund.
That’s my shot at it. Got a better idea for Aaron? Let us know in the comments.