23 y/o, just started PhD, 45k in savings

[marisca]

I'm 23 y/o and I've just started my PhD in Science last July (takes 3-3.5 years) from which I can save ~25k per year (conservative estimate) and as of writing this I have 45k in savings. After my PhD I aim to stay in Australia, but if no opportunities arise here, I might have to go to the US, Canada, or Europe.

What would you suggest to to get the most out of my savings? As I've been quite ignorant when it comes to money up to this point, my first step will probably be setting up a higher interest savings account - is Rams online savings account a good option? Next, should I consider an ETF?

 

[alvakm]

@marisca Think long term, but be prepared for changes. A lot of PhD candidates take longer than they plan to get through it!

 

[wowdarling]

@marisca Invest for the long term. Spread your risk by investing in many markets. There are many threads here with more specific advice in the last month.

 

[mollyincasting]

@marisca Got a lot of mates who did science PHDs here, no jobs at all. Most had to go to Germany or Europe. Also the PHDs took way longer than planned, and also had a friends visa revoked halfway through for no reason. Absolute disaster.

 

[craighuntsherbs]

@mollyincasting He should quit the PhD immediately. I saw a bunch of the best and brightest students go on to do PhD's and end up with significantly worse job outcomes than the students who joined the workforce after completing a bachelors. Not only that but there has been significantly better work outcomes for those who quit their PhD, than those that eventually graduated. Maybe the outcomes are better if you go overseas but Australia is terrible.

 

[chillcwill]

@marisca Congrats on getting in to a PhD Squirrel. Get it done as efficiently as you can and as soon as you can, financially then you can start earning real income.

In the mean time, I would set some cash aside in a high interest savings account (e.g. AMP Bett3r, ING Savings Maximiser) as an emergency fund and enough to settle overseas if you needed to move for work. Even though that's years away, you don't want to get stuck in a jam.

I might then put a chunk into an ETF or Vanguard Fund like VDHG and add to it every semester (assume you might tutor or teach, so the income will be pretty lumpy). Maybe 1/3 to 1/2 of my savings. The rest I'd keep in cash, at least until I graduated.

Like people say, a PhD can take longer than expected - not that your asking for advice on that but from one PhD candidate to another make your PhD as simple as possible to get it done as fast as possible. What the University (grants) or your supervisor (publications, exploration) have in mind won't necessarily be what you might have in mind (submission, asap).

 

[marisca]

@chillcwill Thanks for the great response. What would be the best approach for me to buy into VDHG (I'm not all to familiar with the process, but from what I've read there are different options)? Also, my income is fortnightly so should I add to it every fortnight or less frequently?

 

[chillcwill]

@marisca No trouble Squirrel. You'll have to have a think about how you'll invest but start by finding out your risk tolerance and decide on a fund/etf to invest in. Take a look at the Vanguard site and iShares (Blackrock AU) - they have similar products to chose from.

The way I see it, investing in a managed fund is useful if you're adding small amounts frequently (say < $500 per fornight) whilst an ETF is more effective if you're investing larger amounts (e.g. $2000 +) less often or just investing larger amounts per transaction. This is mainly due to brokerage costs ($11 per buy order, 26x per year = $286 p.a.). So if you want to invest $500 a fortnight, a managed fund with an automatic investment plan would be less expensive and simpler than coping a 2.2% brokerage charge on an ETF. You can always just save up and invest into an ETF less frequently if you don't want to use a managed fund, which typically have slightly higher ongoing fees.

If you want to buy an ETF, you need a broker, there are several no frills, online brokers in Oz, but CMC, Commsec, NABTrade are fairly popular, with CMC being the cheapest online broker with no account minimums.

If you have a bit of time, then its worth educating yourself with a couple books, The Bogleheads' Guide to Investing is a good place to start. Your Uni library should have it or be able to order it, inter-library.

Good luck with your PhD.