<p>D graduated from college in May and is just about to start a full-time job with a real salary, benefits, etc. (she has been doing odd jobs since May but not making enough to think much about saving).</p>
<p>She plans to go to graduate school in a few years. Should she just use a regular savings account or is there a better, fairly low-risk short-term way for her to save?</p>
<p>Out of curiosity, what kind of grad school. Some provide full funding so one shouldn’t have to pay whereas others are really expensive.</p>
<p>Depending on your D’s field and employer, it’s possible the company might pay for her grad school. Mine did, eons ago, for my MBA; it reimbursed my tuition and books as long as I earned no less than a B in each course. D1’s employer paid for her master’s with similar grade provisions. Just before she finished, the company announced it would now require employees to remain with the firm one year for each year of school that was paid for or else the tuition & books funds must be paid back. Current employees already attending school were grandfathered in, so she’s not required to remain but plans to do so as she loves her job. I hope your D may have similar benefits.</p>
<p>PhD programs worth attending should be funded with tuition waiver and living expense stipend. For this goal, she should just try to pay off any undergraduate or other debt so that such debt will not be following her around.</p>
<p>Ok, yes, folks but let’s not disencentivize a young adult trying to save money while working between situations. </p>
<p>Can someone reply to the OP’s question for a “fairly low-risk, short-term” financial instrument that is better than a simple savings account?</p>
<p>D is thinking either law school (I know - and she says she knows - all about the cons of going to law school) or a master’s degree in foreign affairs. I do think there are some (few) at least partially funded master’s programs but many (very good ones, like Yale and Georgetown) are not.</p>
<p>Good for her for having the forethought to save. If it were my daughter, I would suggest she set up an automatic payroll deduct for each period of whatever amount she can afford that goes into a money market account (since you are saying short term and she will need the money “in a few years”.) Sure, there are ways to earn higher interest, but those come with risk. My rule of thumb for those types of investments is for money I would potentially be using more than 5-7 years from now. </p>
<p>Since she has just started making a full time salary, if she does payroll deduct from the start and “pays herself first”, chances are she won’t even miss that money and she will have a nice accumulation after a few years.</p>
<p>Is your D working in the same city you live in? Our S2 was able to save a lot of money by living with us right out of college for a year while working full time.</p>
<p>How many years is a few years? If she’s going to work for 5 years, then she could actually put money into mutual funds if she’s not risk averse. I worked for six years between my Master’s and PhD programs. During that time, I had money directed automatically into mutual funds. I never missed the money. If she wants safer methods, then save until a certain amount, put that into a CD, building a laddered set of CDs. </p>
<p>I agree with PackMom. The best way to say is to live at home. I always had roommates to keep my costs down.</p>
<p>Totally agree regarding living at home if feasible.</p>
<p>MathildaMae- Yale just received a large gift that provides funding for some of their Masters of Global Affairs students; for some lucky students, this includes full tuition and a stipend…</p>
<p>Don’t rule out continuing to work fulltime while attending graduate school part-time…pay graduate school tuition and expenses as you go with earnings from job. It can be done…that’s what I’m doing right now. I’m half way through a 10 semester part-time master’s program now…I’ll graduate debt free in 5 more semesters…about 1 1/2 years from now.</p>
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<p>Another thing to consider is to find employment with a given university so one is eligible for tuition reimbursement so it is almost free after taxation on the benefit. Moreover, most supervisors in such universities are understanding about scheduling and off-days to facilitate taking courses part-time, especially during midterm/final exams/papers periods</p>
<p>If it were my kid going to law school, I would tell her to save either the full cost of one year of attendance before she enters (so she would have $60k plus in the bank before enrolling), or, every month, put away half of what her student loan payment would be.</p>
<p>She might intellectually know about the cons of law school, but it might not be brought home to her until she actually takes money out of her paycheck every month as if she had a student loan payment.</p>
<p>Packing away $60,000 ain’t easy for a 20 something year-old! Borrowing $180,000 for 3 years of law school, combined with the ‘magic’ of compound interest, is a giant anchor for a young person to start out a career with, especially if one has undergraduate loan balances additionally. I doubt I would have considered graduate school personally if I had had to borrow maybe $60,000 for my graduate education.</p>
<p>My D has been considering grad school, but Northwestern’s $60k/year tuition is way too steep … and there are no scholarships or fellowships for the program she wants. She looked at a program at Rush that was half the cost with some scholarships available. With the recent bonus she got at work, she is rethinking grad school at this point. I am encouraging her to sock money away - live below her means - so she can either have the flexibility to pay for school, or she will end up with a nice pile of money if she doesn’t end up needing it for school. I work at a grad school & am amazed by how many students come to school with no money saved. Every time I talk with someone who has managed to save first, I am so pleased! </p>
<p>Not all grad programs are funded, and not all offer (large) scholarships. For those who want to keep borrowing to a minimum, I would say live at home (if possible), and live below your means. It’s okay to wait to go to school … in some cases, it’s preferable to have experience before grad school.</p>
<p>Depending on your daughter income I would suggest for her to explore Roth IRA (perhaps in addition to other saving vehicles).</p>
<p>She can always withdraw her contributions from the Roth IRA tax and penalty-free. If she decides against going to grad school, this will be her rainy day fund (hopefully to be used only after retirement).</p>