Starting Medical School w/ 50k in savings

[Lakers2023Champs]

Hi y'all. I will have saved 50k from my gap year job as an IT consultant before I start med school next year. I am a tx resident who got accepted to my hometown med school. As a result, I can stay at my parents' home and attend med school for 25k/yr (100k total). I'm unsure what to do with my gap year money (how to save/invest or use it to pay for part of med school) and would love advice from you all. Thank you 🙂

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[thesauce]

Hi y'all. I will have saved 50k from my gap year job as an IT consultant before I start med school next year. I am a tx resident who got accepted to my hometown med school. As a result, I can stay at my parents' home and attend med school for 25k/yr (100k total). I'm unsure what to do with my gap year money (how to save/invest or use it to pay for part of med school) and would love advice from you all. Thank you 🙂

What I would do:

Fully fund ROTH each year and leave the rest in a high yield savings account. Live frugally. Keep the savings and take on the student loans. Feels good to have a safety net of cash.

Likely you’ll have opportunities for loan repayment through employer and you’ll knock out 100k in your first year if you want to.

 

[Angler]

Fully fund ROTH each year

You can't really do Roth unless you have earned income in that year. If you have a part time job while in med school, that will work.

 

[thesauce]

You can't really do Roth unless you have earned income in that year. If you have a part time job while in med school, that will work.

Many do it without, but yes you’re definitely correct

 

[abolt18]

Hi y'all. I will have saved 50k from my gap year job as an IT consultant before I start med school next year. I am a tx resident who got accepted to my hometown med school. As a result, I can stay at my parents' home and attend med school for 25k/yr (100k total). I'm unsure what to do with my gap year money (how to save/invest or use it to pay for part of med school) and would love advice from you all. Thank you 🙂

High-yield savings account. Set some aside -- like $10K -- to NOT use for tuition (Step 1&2, residency applications, moving for residency, etc.) Pay-as-you-go on the tuition, avoiding loans as much as possible. Still apply for any sort of scholarship you can find.

As noted above, you could max out the Roth IRA this year with your earned income, but not future years unless you make some money in those years.

Whatever you decide to do, it'll work out. Just be intentional and try to reduce your living expenses. I don't know what federal student loan interest rates are today, but I'm sure they're not favorable. I'd avoid taking any loans as long as possible.

 

[FlowRate]

Sometimes having assets affects FAFSA and school fin aid packages, so keep that in mind.

I'd park 30k in a HYSA and leave 20k in a regular bank account. These days I prefer to have a bit more immediately available cash but, as a med student or resident, 20k is a great true emergency fund.

There are a lot of expenses that aren't always perfectly covered in med school loan packages or that leave things tight. Also nice to have some extra liquid so you can afford to take decent vacations.

 

[gutonc]

Sometimes having assets affects FAFSA and school fin aid packages, so keep that in mind.

I'd park 30k in a HYSA and leave 20k in a regular bank account. These days I prefer to have a bit more immediately available cash but, as a med student or resident, 20k is a great true emergency fund.

There are a lot of expenses that aren't always perfectly covered in med school loan packages or that leave things tight. Also nice to have some extra liquid so you can afford to take decent vacations.

FWIW, I've got a HYSA currently at 4.825% that I can access transfer to my primary checking account and spend in seconds. If I could be bothered to open an account at another CU in town that rate would be 5.1%.

If I were in this scenario, I'd use 5-10K on a CD ladder, keep 5K in the checking and rest in a HYSA

 

[FlowRate]

FWIW, I've got a HYSA currently at 4.825% that I can access transfer to my primary checking account and spend in seconds. If I could be bothered to open an account at another CU in town that rate would be 5.1%.

If I were in this scenario, I'd use 5-10K on a CD ladder, keep 5K in the checking and rest in a HYSA

Oh nice, I'm using UFB Direct because they typically have the highest HYSA rate but transferring money from them is not a quick process and I (apparently incorrectly) assumed other HYSA were similar.

 

[abolt18]

Oh nice, I'm using UFB Direct because they typically have the highest HYSA rate but transferring money from them is not a quick process and I (apparently incorrectly) assumed other HYSA were similar.

Only thing that pisses me off with UFB Direct (I use them for my emergency fund) is, instead of just increasing your rate when rates go up like they do at ally bank, instead they will create a new account type with a bogus marginally different name with the higher interest rate, leaving your account with the lower interest rate alone. So I have to call them every couple months - like I just did a few minutes ago because this post reminded me to - and tell them I want to change my "preferred savings" to the "premier savings" or now to the "HYSA". Guess that's the price I pay for a higher interest rate.

 

[FlowRate]

Only thing that pisses me off with UFB Direct (I use them for my emergency fund) is, instead of just increasing your rate when rates go up like they do at ally bank, instead they will create a new account type with a bogus marginally different name with the higher interest rate, leaving your account with the lower interest rate alone. So I have to call them every couple months - like I just did a few minutes ago because this post reminded me to - and tell them I want to change my "preferred savings" to the "premier savings" or now to the "HYSA". Guess that's the price I pay for a higher interest rate.

Oh interesting, thanks for the tip, I hadn't been paying close attention so I'll need to double-check. I thought I did see a rate increase on mine but I'll have to look again.

Edit: Like you said, was at 4.2% and had to call to get upgraded to 5.2%

Honestly, if there are lower maintenance HYSA's that transfer money more quickly and don't require a call every few months, I'd prefer to switch to something else even if with a slightly lower yield.

 

[abolt18]

Oh interesting, thanks for the tip, I hadn't been paying close attention so I'll need to double-check. I thought I did see a rate increase on mine but I'll have to look again.

Edit: Like you said, was at 4.2% and had to call to get upgraded to 5.2%

Honestly, if there are lower maintenance HYSA's that transfer money more quickly and don't require a call every few months, I'd prefer to switch to something else even if with a slightly lower yield.

Vanguard money market account. 5.3%. I've just been too lazy to move the money. Many more of these phone calls to UFB will be enough motivation.

Money market funds for short-term investing goals | Vanguard

Money market funds are short-term cash investments that seek to preserve your savings. Learn their benefits and how to use them.

investor.vanguard.com

 

[FlowRate]

Vanguard money market account. 5.3%. I've just been too lazy to move the money. Many more of these phone calls to UFB will be enough motivation.

Money market funds for short-term investing goals | Vanguard

Money market funds are short-term cash investments that seek to preserve your savings. Learn their benefits and how to use them.

investor.vanguard.com

Interesting suggestion. Please correct me if I'm wrong, pretty sure money market accounts aren't FDIC insured and can theoretically lose money (although both of those things are extremely unlikely)?

 

[gutonc]

Interesting suggestion. Please correct me if I'm wrong, pretty sure money market accounts aren't FDIC insured and can theoretically lose money (although both of those things are extremely unlikely)?

You are not correct. Money Market accounts are insured.

 

[FlowRate]

You are not correct. Money Market accounts are insured.

Thanks--I think the other person linking to Vanguard money market mutual funds is what threw me off, since those are obviously just investments.

 

[gutonc]

Thanks--I think the other person linking to Vanguard money market mutual funds is what threw me off, since those are obviously just investments.

That is an understandable point of confusion.

 

[abolt18]

Interesting suggestion. Please correct me if I'm wrong, pretty sure money market accounts aren't FDIC insured and can theoretically lose money (although both of those things are extremely unlikely)?

Sorry, you're right that it's a money market FUND not account. But I think the risk of losing money is overstated. Biggest drop in 2008 of any money market fund was to $0.97 before the government stepped in, which was a very rare event (and they didn't all lose money). It has potential to lose money compared to an FDIC insured account, but it's so unbelievably unlikely it doesn't concern me at all.

If you are losing money in a vanguard federal money market fund, there are MUCH bigger problems in the world.