gear02

I have a bunch of loans for my bschool that pays for both tuition and living expenses. The way it works is that the school sets a budget and my loans can only cover that budget, no more. The money is sent from the lenders (sallie mae) to my bursar account to cover all tuition and educational expenses. Then, the positive balance is refunded to me in a check which I deposit in my account. I now have all the money that covers all of the expenses (rent, food, etc.) for this semester.

However, I really don't need the $2000-4000 that covers November and December right now. So I have a lot of money that I need in the short term (in 2 months) but that I don't need right now. It's a waste for it to sit in my checking account so I was wondering if you had any ideas for investment with it.

I went and got a 32 day CD with an APY of 1% and I put the rest in a savings account that I think gives less than 1%. It would give more, but I'm under $10K so it's < 1%.

It has to be a very short term, fairly liquid form of investment. I may not need it now, but I should time it so I get it back when I do.

What would you do?

gear02

Ok...with sbp's help I opened a ING orange account. Can someone good in finance/banking calculate which is the better investment?

$4000 at 1% APR on a 32 day CD
$4000 in an ING account (3.3% APR?)

I think the ING is better, but I don't know how to calculate interest yet (well I did but I forgot, but I'll learn it again soon)

smeakim

Its quite simple. The interest on a CD is the same as on a savings account. 3.3 APR versus 1 APR. The 3.3 is better. You might also think about paying back the loan ahead of time. Also while in school, I used to work for a large student loan company, you should at least pay your interest each month on those loans. You don't have to, but this is why. The interest on your account adds up in a separate bucket in the systen. Then when you graduate the interest over the 3,4,5 or 8 years of school will do what they call cap. It basically is added back to the principal. Then you actaully owe more than you took out as soon as you start paying back. Also now your principal balance is higher so your payment is going to be higher than if you only paid the interest now. Also if you pay a loan back within 30-60 days after you get it if it is in full, they cancel the loan and you don't have to pay the interest on it at all. Its something to think about. JMHO.

LegendKiller

Paying interest as you go isn't a bad idea. Your interest isn't capitalized in the prin, as smeakim said. Additionally you don't pay the full int amount at the end because int can be written off in your income tax statement, so you might only end up paying 75% of your original int amount.

gear02

Well, I can't spend this money to pay off the interest. It's FROM the loan that's marked for my rent, expenses, etc. in november and december. I will use the money, just not now. I figure why not use the money now to my advantage.

smeakim

Your best is to leave it in the ING. If you need it, you have access to it. The CD is locked for those days. So the 3.3% is a pretty good return without having to worry about losing the prin.

The paying the interest was a side note. Pay it as you go, and you will be much better off becuase they can't add it back to the Prin and you can write if off each year.

The 3.3% is a great rate for 4K, and it requires effort on your part to get the money out so you can spend it willy nilly. Let it sit there and come back to it in Nov.

docsoc

This whole ING obsession on this board is a little crazy. Check out some of the comparision sites like www.bankrate.com or www.bestcashcow.com. You should be able to get a bank account in the mid to high 3% range and a 12 month cd in the low to mid 4% range. ING is ok, but why not do better

ChIcKeN_HaWk

Quick question which may sound stupid but here goes...If I take $5000 and put into a 1 month Cd @ lets say 3% my profit off of that money at the end of that 1 month would be $150 or am I crazy?

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cheapie

you are crazy. i think it would be around $13.

http://www.moneymatterstome.co.uk/In...Calculator.htm

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InfiniteNothing

It's 3% annually. Multiply the number by 1/12 the number of months it'll be in the CD (3.5% * 1/12 * 1 month)

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