Hi everyone!

Put yourself in this scenario and let me know what you would do.

I'm a 24y/o male. Making $50k/year. I have about $13k in savings at bofa, which has been saved over the past ~2-3 years (i typically add $300-400/month into it these days). I have the typical bills (small cc bill each month, rent, utilities, i typically don't shop for unneeded stuff). I'm thinking about starting my own business in a year or so...

What would you do with the $13k in the bank? It makes basically no interest. I keep it for a rainy day, but thinking about other options for some of it. Would you move it into something? Would you keep it there for a rainy day? Stocks?

put $4,000 (the max allowed) in a roth ira this year, and $4000 in a roth ira jan 1. I use vanguard myself, index funds.

Seriously, you won't regret it.

It's best to wait til retirement to take it out.

But you CAN use it after it's been in there 5 years for the purchase of a first home.

The rest of the money, keep in a money market account as an emergency fund. There are plenty paying over 3% interest.

Actually Roth IRA contributions can be taken out at ANY TIME without IRS penalty, however the investment company or bank may impose a fee for selling within a specified period of time (see investment prospectus). Any earnings must be left alone until 59 1/2 AND the account must have been open for 5 years in most cases.
IMHO it's good monry management to keep $5-10K sitting in a liquid savings account (such as ING) for when "life happens" so you don't need to cash in any retirement funds.

Paying off consumer debt and saving for major purchases such as a car is an excellent way to get ahead long term.

Yes that is right, the earnings can't be withdrawn early without penalty except in certain exceptions. I should have been more specific in my answer!

Putting 4K in now, 4K in Jan, would leave 5K for the emergency fund.

I assumed the op did not have any credit card debt, since I couldn't imagine saving so much money if you had credit cards to pay off.....

But I guess some people do it, so I shouldn't have assumed......

Same with a car loan, pay that off first unless you have a crazy low interest rate less than what you'd get in savings.

I agree with everyone else. And have to add... wow, I'm jealous that you are 24 and

1). Make 50K a year
2). Have 13K in the bank
3). Have no real debt.

Congratulations!

Thanks for the great advice! How are ING accounts (i will search the boards for some mor einfo on ING)? I worry about putting my money into a place online. But, bofa is only giving me roughly .01% or somethign rediculously low on my savings. So i make very little with interest. I wouldn't mind putting a chunk of it into an account that made some nice interest returns on it.

I'm not too familiar with how roth IRA'S work. I will have to search the board for some info. I will keep it in mind, thanks!

Yes, i have virtually no debt these days thanks to the advice from this site (i've been reading the forums for ~2 years now)! I keep a very, very minimal amount on my credit cards (usually below 10% of my credit line) and pay off everything each month. I try my best to play it smart and thanks for the warm compliments! I appreiciate them!!

MrMut -

I really like my ING account. And I don't care that the interest rate is lower than Emigrant by about .6% Let me know if you would like a referral for free $25 for opening a new ING savings.

I didn't know much about Roth IRA's either until a few months ago. Still wouldn't say I know a *whole* lot. But to at least get the ball rolling, I opened one up. T Rowe lets you open one with $50 - as long as you do automated contributions! Of course with your kind of savings, you would want to contribute more. When choosing a Roth, make sure to read the morningstar reviews of the fund - it will give you ratings of the fund over x period of time. Months, Years, etc. It will show risk level vs. return. At your age you can be fairly aggressive.

Rule of thumb is keep at least 6-9 months of living expenses in the bank for a rainy day.

After you deduct the 6-9 months of expenses you could put some in a IRA and find a good interest bearing money market account.

If I had that kind of money in my savings, I'd move it to Ing or Emigrant-Direct and gain some nice interest. I also agree with other posters about getting a ROTH IRA. Do it.

Also, I saw you pay rent. Have you thought about buying a house, rather than throwing your money at rent? My advice would be to buy small keeping your 'Mortgage + Taxes + Insurance' equal to or less than your rent amount. Treat it as a 'starter' home, don't go big with the first house you buy.

Congrats on the success you have. When I was 24 I was busy burying myself with new found credit card debt. 13 years later I'm paying the price with high interest rates and subprime lending. It's great you are learning and applying the good advice. Great job!

-NineCount