Better to use savings and put towards first year tuition or keep as an emergency fund?

[Roy Williams]

---

Members don't see this ad.

Basically I'm trying to figure out what the best use of my savings would be. On one hand, putting it all towards my first year tuition would help with the debt in the end (given interest). However, I feel it would also be smart to have an emergency fund in case I should need it for some unforeseen circumstances.

Thoughts?

 

[ncide]

It depends on how much you saved. I used some of my funds to help with my living expenses as well as funds to help move and furnish my apartment.

 

[Roy Williams]

It depends on how much you saved. I used some of my funds to help with my living expenses as well as funds to help move and furnish my apartment.

Bout $20k

 

[ncide]

Use it to cover your rent and furnishings, and any other expenses that come up. Don't take out the full cost of living expenses out, so you can save on compounding interest early on.

 

[Roy Williams]

Use it to cover your rent and furnishings, and any other expenses that come up. Don't take out the full cost of living expenses out, so you can save on compounding interest early on.

Sounds smart, thanks!

 

[Scumbag_Steve]

.

 

[Roy Williams]

You're in a great spot. Stretch $15,000 of it as far as you can for living expenses, taking out as little as possible, as you described. If you're interested in specializing, save the last $5,000 for the application/interview process, as well as one-time costs of relocating when you move to start said program

Hmm that's a good thought. So keep that 5k for about 3 years down the road?

 

[Scumbag_Steve]

.

 

[fit2]

Hmm that's a good thought. So keep that 5k for about 3 years down the road?

you could invest it in some safe mutual funds..they should make a few hundreds if not over a thousand 3 years down the road.
definitely have cash on hand for emergencies, living, and other costs that could come up. you don't want to be "exposed"

 

[Roy Williams]

you could invest it in some safe mutual funds..they should make a few hundreds if not over a thousand 3 years down the road.
definitely have cash on hand for emergencies, living, and other costs that could come up. you don't want to be "exposed"

I guess my question for this would be, would the invested amount make more than the debt I would incur from interest? This seems like the only reason I would want to invest it.

 

[Roy Williams]

If you're interested in applying to a residency program, yes. I think $5,000 is a safe estimate for individual program fees, application fees, travel to and from interviews, perhaps a new suit, and depending on how much you bring also relocating. It could run over that but since you're in such a good position, it makes sense to put that money aside so even if you do go over you won't have to suddenly come up with $6,000 you don't have, and just have to come up with $1,000 instead

Sounds like a good idea. Hadn't thought about needing savings for that should I go that route. Thanks!

 

[fit2]

I guess my question for this would be, would the invested amount make more than the debt I would incur from interest? This seems like the only reason I would want to invest it.

do you know how much debt you'll take on? and a rough estimate of the interest?
even if the option of paying is better ( which I actually doubt) you really have to consider the necessity of having cash on hand in case you need it)

 

[Roy Williams]

do you know how much debt you'll take on? and a rough estimate of the interest?
even if the option of paying is better ( which I actually doubt) you really have to consider the necessity of having cash on hand in case you need it)

That is true. But what I meant is, would I make more money on interest with $20k in mutual funds than I would incur from debt for $20k worth of loans? Because if I invest it I'd have to take out a loan for that amount. So I'd only want to invest it if I came out ahead in the long run.

 

[fit2]

That is true. But what I meant is, would I make more money on interest with $20k in mutual funds than I would incur from debt for $20k worth of loans? Because if I invest it I'd have to take out a loan for that amount. So I'd only want to invest it if I came out ahead in the long run.

oh i see. when you borrow you're at a set rate but when you invest there's some uncertainty. However, from my experience I've made about 10% return on my investment yearly. I'm actually not sure what the interest rates for student loans are but I'd be surprised if they were higher than that

 

[fit2]

still you gotta be careful. you don't have a guaranteed return you know?

 

[Roy Williams]

still you gotta be careful. you don't have a guaranteed return you know?

Yeah exactly, I'd just want to make sure I was smart about it while staying relatively "safe"

 

[Tooth Ferry]

Save the cash. Never know what's going to come up during 4+ years. You can always pay the interest on your loans right before the interest capitalizes after you graduate.

 

[deleted696582]

Basically I'm trying to figure out what the best use of my savings would be. On one hand, putting it all towards my first year tuition would help with the debt in the end (given interest). However, I feel it would also be smart to have an emergency fund in case I should need it for some unforeseen circumstances.

Thoughts?

Just don't have any emergencies.

Just kidding. I'd probably save it for random stuff.

 

[whaleofatale]

Basically I'm trying to figure out what the best use of my savings would be. On one hand, putting it all towards my first year tuition would help with the debt in the end (given interest). However, I feel it would also be smart to have an emergency fund in case I should need it for some unforeseen circumstances.

Thoughts?

Put it towards your first-year costs and use loans in an emergency. Interest will only grow over time, so best to borrow later.

 

[Tooth Ferry]

Put it towards your first-year costs and use loans in an emergency. Interest will only grow over time, so best to borrow later.

Get emergency loans? This is terrible advice. The interest on these 'emergency loans' is going to be huge.

 

[rectangle]

the personal finance subreddit might be of some help

 

[Faux]

I would actually put it all in bit coin, but thats just me

 

[FlossyLady1]

Stretch some now for living expenses because the interest on your loans is going to be guaranteed. Then put the rest in an Ally Bank or similar getting 1% APY as your emergency fund. It would be nice to invest now but in a situation such as this it would be prudent to stay on the safe side.

 

[whaleofatale]

Get emergency loans? This is terrible advice. The interest on these 'emergency loans' is going to be huge.

In terms of saving money over time, it is not terrible advice, it is the best advice. The student should use his savings towards his first year, and then borrow federal loans later if need be. Why borrow now, when the student could borrow later? Students should absolutely utilize personal resources before borrowing.

 

[Tooth Ferry]

In terms of saving money over time, it is not terrible advice, it is the best advice. The student should use his savings towards his first year, and then borrow federal loans later if need be. Why borrow now, when the student could borrow later? Students should absolutely utilize personal resources before borrowing.

If they have an emergency, how quickly are they going to be able to secure federal loans? Of course it makes sense to save money over time but in a pinch what other options will they have? Payday loans? Pawnshops? Going to their local commercial bank?

 

[fit2]

Mutual funds are dead. It's tough to get above 7% annual interest with mutual funds because of management fees.

But if you can manage above a 7% return (current student loans are between 5-7%), then saving/investing is a financially better option.

But like many others have said, definitely keep an emergency fund going. I'm planning on doing the same exact thing, loans for tuition, fees, and dental supplies, while using savings for food and half of my rent.

Fidelity mutual funds don't have fees. That's the way to go

 

[Roy Williams]

If they have an emergency, how quickly are they going to be able to secure federal loans? Of course it makes sense to save money over time but in a pinch what other options will they have? Payday loans? Pawnshops? Going to their local commercial bank?

I'd like to hear the answer to this question too!

 

[whaleofatale]

If they have an emergency, how quickly are they going to be able to secure federal loans? Of course it makes sense to save money over time but in a pinch what other options will they have? Payday loans? Pawnshops? Going to their local commercial bank?

This is going to vary by school and whether the student completes their FAFSA correctly, but I've reviewed aid applications and disbursed funds in as little as two days. As long as the student is eligible for federal funding the process should be relatively fast.