Saving all of my money for college or still putting some money into an investment portfolio?

[colemcak]

I’m 18. I’m planning on starting online community college for 2 years before transferring to a university. I have $5000 in my HYSA (that’s my only bank account.) I work a full time job making about $2,700 a month (after taxes.) with my bills taking about 70% of my income. Leaving me about $750 at the end of the month

My question is, should I be putting that extra money into my HYSA and saving it to pay for college in cash, because by the end of the 2 years I’d have a pretty good amount. Or should I still be putting some away into an investment portfolio diversifying capital across indexes such as a NASDAQ, S&P 500, and Dow Jones, Just for example. Because my futures important. I’d just rather take out the least amount possible for student loans putting me in debt. When I could possibly catch up on retirement when I have that degree.

What should I do?

 

[alexburke]

@colemcak Really not a wrong answer here. How much will you need from college? Is it more than how much you can save in 2 years?

If so, you could just park everything in an HYSA and then take out a few loans as possible. Others would suggest that you should open a Roth IRA and start investing in that. You could split the difference and save 250 a month in the Roth and 500 in the HYSA.

Point is, any option is going to help you be extremely financially successful. If I were in your shoes, I would probably split the difference and do my third suggested option. Dollars you invest between 18-22 will grow average close to 100x the contribution by age 65

 

[ilkao223]

@colemcak If your time horizon for using the money is in 2 years, leave it in an HYSA. Putting money into a brokerage account and investing in index funds, while a great idea (VOO and chill), it should be done for longer periods. If the market takes a downturn, you may not recover in 2 years. Your HYSA will give you relatively stable gains in the 4.5 to 5% range.

I would not start really investing until you are in the job world after school. Employers offer 401Ks which are great for investing and employers often match up to a certain percent which is free money. Try and maximize what you can put in to the 401K when you are in the work force. Try and pay as much as you can for college without taking loans and getting into debt.

What I didn’t hear you mention is an emergency fund. That is essentially what that $5K is for you. I keep my emergency fund money in my HYSA. My personal rule is to keep 6 months of pay in my emergency fund, but since you are a prospective student, it’s whatever you can put in it. Your emergency fund could pay for car repairs or other unexpected but important expenses.