How can I save money while on disability?
I'm a 19 year old female and thinking about going to college next year. If I have over $20,000 in my savings account and receive $1,350 every month from disability while living at my parent house. How should I save my money and where should I put it? My mom wants $200 a month in rent and I don't own a car. I've been putting my funds in a savings account with barely any interest. I want to put them somewhere else for the long term. I have no credit debt.
If you have $20k in savings account already, I'd recommend moving that over to a High Yield Savings Account like what American Express offers (https://personalsavings.americanexpress.com/high-yield-savings-account.html?extlink=ps2017=searchbranded-CampID-10705730-REF) so you can be earning higher interest while still keeping it liquid, insured, and principal protected. You could also open a Standard Brokerage account at some place like Vanguard (https://personal.vanguard.com/open-account/oax/app/triage#/) and put a portion of the funds (I would not put all due to being on a fixed income and unable to work) into a very conservative municipal bond fund. Vanguard ETF's are very low cost, and municipal bonds provide a stated coupon (interest rate) that is earned tax-free. Either of those options is going to give you better earning potential than just leaving it where it is now.
When I create a financial and investment plan for somebody, I help them figure out when they will need money in the future. That should also be your first step. Because you are going to college next year, you will probably need most of that money soon. Here's the break down of how I would create am investment plan:
- Money you will need within the next year and your emergency fund (which should be 3 months worth of expenses) should be held in cash or cash-like investments. This money needs to be safe and liquid.
- Anything you need in 1 to 3 years should be invested conservatively. Short-term bond funds can be a good example of a conservative investment. It should earn you about 3-4% a year without much volatility.
- Your 4-7 year goals can be invested in a moderate risk portfolio.
- Anything longer than that can have more exposure to stocks.
You get the point. Before you think about what to invest in, prepare your financial plan. This should guide you into how to invest the money.
I hope this helps.
Two important things for you to consider: how much are you expecting to pay for school, and what are your upcoming career objectives? You can do a lot with $20,000, but you need to be prepared for the expenditures that come with an education and life in general.
If you’re planning on going to a community college, or you have a scholarship that will cover most of your tuition, I’d get as much of your savings as possible into a high-yield account (preferably one with minimal fees), and potentially start contributing to an investment account. If you need to dip into those savings to pay for school, you should keep the money in an account with a decent yield and even more limited fees.
Once you graduate, you need to have enough money to support yourself until you start working. It’s always important to have that three-to-six month safety net, but it’s especially important for recent graduates trying to jumpstart a career. Until your income is steady, you’ll want to keep a good portion of your savings liquid instead of investing.
If you can maintain most of that $20K, go to school and continue saving some of your disability money, then you should look into moving about half of those funds into an investment account. I’d suggest going with Betterment - simple setup, trustworthy advice, and very reasonable rates.
You’re in a good situation financially, just make sure to keep the big picture in mind as you start moving your money around. Good luck and enjoy school!