What should a college kid do with his extra money?

[Kevins89notch5.0]

Assuming I don't pick up binge drinking, heavy drug use, a new mustang, or lose my job, I can predict having a pretty damn large bank account by the time I finish college in 3 years.  What would be the wise decision to do with this money over the next couple years?  I guess transferring it from my checking to savings would be a start.  I have an IMG account, but its just not connected to my bank account.  Is there a better idea than the 4% or so IMG would give me?

[Chris Wilson]

Read the thread over on GFY, it's got all the info on investing you need to know and then some. 

[TireSmoke]

short term or long term?

Roth IRA would be the best long term IMHO...

Problem is, even with some of the 5% bank accounts, you still paying tax on your income AND paying tax on capital gains...taxed 5% bank accounts barely (or dont) beat inflation...

[Mr. Black]

LMFAO @ CW on GFY. I would have never seen that coming.

[Kevins89notch5.0]

short term or long term?

Hard to say.  Like I kinda joked, a stupid idea would be to blow it on a new mustang, new DD, etc.  The smart thing would be to save the money.  I would have more than plenty to use for a down payment on a house in 4-5 years.

[TireSmoke]

the earlier you start putting money into accounts like roth IRA's or 401k's, the larger they will be in 40 years when you are gonna need em.  Seems silly now, but when you are making 30%+ a year on these accounts, it REALLY adds up fast. 

Here's what happens to a yearly $1,000 investment if its only making 10% annually...

1,000
2,100
3,310
4,641
6,105
7,716
9,487
11,436
13,579
15,937
18,531
21,384
24,523
27,975
31,772
35,950
40,545
45,599
51,159
57,275
64,002
71,403
79,543
88,497
98,347
109,182
121,100
134,210
148,631
164,494
181,943
201,138
222,252
245,477
271,024
299,127
330,039
364,043
401,448
442,593

If you make 30% over 40 years the numbers are just STUPID

[Kevins89notch5.0]

Yeah, I have a 100K variable life insurance policy thats only $5 a month, but I've been tossing in $50 a month since I was 16.  Its worth something like a million if I'm alive at 80 since I started it so young.

[Mr. White]

LMFAO @ CW on GFY. I would have never seen that coming.

Never hoid of it.

[Dave88LX]

ING not IMG.

[KC LX]

Yeah, I have a 100K variable life insurance policy thats only $5 a month, but I've been tossing in $50 a month since I was 16.  Its worth something like a million if I'm alive at 80 since I started it so young.

Buy up to a larger amount on that while you're young, healthy and get better rates.  You'll have it for your wife/kids and will thank yourself later.

I don't know what your current income is, but check out www.irs.gov to determine what your highest tax rate is based on your regular wages and any income you receive from bank account interest is taxed at highest rate.  You may get a better rate from a short term CD, but the 10% TS noted above is over the duration of the stock market and shouldn't be an expected rate of return over a 4 year period.

[Mr. White]

Ten percent per year isn't uncommon at all.

[TireSmoke]

10 percent is conservative...

Ive got an IRA thats already up 32% this year!!!!!!

[Kevins89notch5.0]

Well I called, and talked to my mom about it.  My parents have a guy at Merrell Lynch.  They are going to ask if he would be able to handle my money, of it I need to find someone here in FL.  My mom seemed pretty shocked when I told her whats in my bank account.  She agreed investing would be smarter than another mustang.