What would you do with 30k in cash savings at 27?
April 22, 2010 10:24 AM   Subscribe

I'm 27, employed, single, renting in the city, what do I do with 30,000 in cash savings? What would you do?

I've been working for two years contract full time now, and recently became permanent full time. My job with my employer is pretty secure. I was going to go to grad school, but have been deferring year to year.

The idea of buying property is appealing, and I have looked into it, but don't feel the need to mortgage myself into oblivion, just yet. I'm pretty easy going and am living debt free, apart from the odd credit card bill. $30,000 is a lot money, or not a lot money. Depends on how you look at it.

What would you do with the money? no consequences? I've thought about a leave of absence, some travel, maybe some courses, but this freedom has me, well, at a lost for things to do.
posted by mistertoronto to Work & Money (42 answers total) 27 users marked this as a favorite
Where do you live? $30,000 is a pittance in some real estate markets and is a down payment in others.
posted by dfriedman at 10:30 AM on April 22, 2010

You have a retirement plan in place, that doesn't include this $30,000, right?

Glad to hear it! I would probably be looking to buy property, if I were you. Great market for it right now, in a lot of places.
posted by Grither at 10:30 AM on April 22, 2010

What would I do? Blow it all in a summer of awesome times.

What should you do? Save it in a CD something does jump out at you.
posted by anti social order at 10:31 AM on April 22, 2010

... *until* something jumps out at you. Don't spend it just because you can.

Unless it's on enough legos to build a life-sized x-wing or something.
posted by anti social order at 10:33 AM on April 22, 2010 [2 favorites]

There are so many things that can happen in your late 20s and early 30s:

You can get find someone and get married.
You can parent a child.
You can find the perfect place to buy.
You can get sick or get in an accident and have medical bills.
You can decide to move across the country.
You can quit your job and take a few months off while searching for something better.
You can travel overseas.

$30,000 in the bank is a lot of money if you're a healthy single renter staying in the same place. It's not a whole lot of money if you want to do any of the above. That $30,000 only means freedom if you keep it around for the moment you really know what you want (or need) to do with it.

Put it in a high-yield savings account or money market account, watch it grow a little bit, and you'll be able to pull the money out whenever you want to do something big.
posted by eschatfische at 10:35 AM on April 22, 2010 [7 favorites]

Renting is still probably a better proposition at the moment, unless you live in or plan to move to an economically depressed region, which doesn't sound to be the case. You might build on your savings until you have a 20% down payment on a house within the price range you want to pay. You're young, and something else might happen in the meantime, in any case.
posted by Blazecock Pileon at 10:40 AM on April 22, 2010

I would pay off all debts (credit car, car, maybe even student depending on interest rates), max out my IRA, drop 5k into a vanguard index fund, stick 1k into green energy stocks, and put the rest in a high interest savings account.
posted by craven_morhead at 10:40 AM on April 22, 2010 [5 favorites]

Is that $30,000 enough to keep you in your current lifestyle for six months? A year? If so, put that much somewhere safe and interest-bearing (that also allows you to pull it out if you need it), and the rest, invest. Assuming you're already fully contributing to a retirement fund, of course.
posted by davejay at 10:45 AM on April 22, 2010

Spend $5000 of it traveling in central or south america. It would last you about 6 months if you werent stingy. Not working for a while, especially if youve worked or been in school your whole life is liberating. It also gives you an awesome feeling of having done something with yourself in your youth AND you dont have to feel irresponsible. Invest the other $25k until you have a better idea.
posted by quelindo at 10:46 AM on April 22, 2010

Best answer: The talking heads are debating about whether or not Canada is in a housing bubble (I'm guessing by your using name you're in Toronto) and the mortgage rules were tightened again, so it's probably not an ideal time to enter the housing market as a first-time buyer. A quick MLS search reveals very little in the way of properties under $200,000 in Toronto.

It is were me, I might put it in a short term, high-interest monetary interest and look again in one year's time. (But also max out your RRSP contributions for this year.)
posted by Kurichina at 10:46 AM on April 22, 2010 [1 favorite]

What would I do? Move to Mexico for six months, starting tomorrow, on the seaside of the southern part of the Baja California peninsula. Get in really good shape and learn Spanish. Read a goddamn bunch of books and surf.
posted by Damn That Television at 10:49 AM on April 22, 2010 [2 favorites]

but this freedom has me, well, at a loss for things to do.

Zen financial advice: it could be because you don't NEED it now. I have been more or less in your position, and the greatest freedom was knowing that I COULD do these things. I could bail out on my job, I could travel or treat friends on a night out if I felt like it. Once that money is gone, so is your freedom to do those things. When you need this freedom, you will know what to do with the money.
posted by whatzit at 10:55 AM on April 22, 2010 [11 favorites]

First of all, it would almost certainly be a good idea for you to open a Roth IRA and make a $5,000 contribution right now. Even if you don't put it into a long term investment (which is pretty much the point of a Roth IRA) you can earn interest on it that you can use at retirement while still having access to your contributions at any time. Also, you always want to have some kind of an emergency fund with at least three months expenses in it (some people feel you need more like 6 months or more). Whatever you do, make sure that you always have direct access to a decent amount of money for unexpected expenses or a crisis like losing your job, because living paycheck to paycheck with no debt can easily turn into being heavily in debt.

So, with that out of the way, what you should do with it mainly depends on what your goals are. If want to save long term for retirement, you can either start investing right away in a taxable account, or just start maxing out your 401k or IRA contributions and using some of your savings to pay for expenses (you really want most of your long term investments to be in tax-protected retirement accounts, because taxes will really eat away at your gains over time). If you want to save short term for a big purchase like a house, keep it in a savings account or put some of it into a CD. If you want to spend it on something important, then spend it. If you don't know, just leave it in your savings account, there's not a whole lot of better choices in terms of investing that don't have a lot of risk in the short term.

The only thing I would advise against is increasing your monthly expenses so that you are living beyond your means, because it is hard to cut back once you start doing that. As long as you keep spending less every month than you take in, leave some money in your savings for emergencies, and save a decent amount for retirement, you should be fine in the long run no matter what you decide to do.
posted by burnmp3s at 10:58 AM on April 22, 2010 [1 favorite]

Best answer: I'd agree with whatzit. Until something emerges as a worthy use for the money, enjoy the freedom of small things. Find out you have to get all four wisdom teeth removed? That's ok. Want to loan some money to a friend in need? You can do it. Moving apartments and need first+last+deposit? Not a problem.

30k isn't a lottery-level amount, but it should be enough to free you from worrying about not having enough money to move through your day-to-day life. That's a freedom that most people don't have.
posted by the jam at 11:07 AM on April 22, 2010 [1 favorite]

Folks, this person lives in Toronto, Ontario, Canada. Much of your advice is very US - specific.
posted by sid at 11:13 AM on April 22, 2010

Assuming you already have maxed out IRA and/or 401k contributions, take 5000 and buy yourself something nice or take a trip. Put the rest in a savings account for either (a) a down payment on a house at some point in the future or (b) 6mos living exenses against something bad happening.

Reward yourself for saving with something nice, but keep saving most of it. Maybe start looking around at your local real estate market and wait for the right deal.
posted by T.D. Strange at 11:13 AM on April 22, 2010

A lot of people here seem to be recommending CDs or High-Yield savings accounts.

Right now, interest rates are the lowest they've been in ages. I'm not sure if that makes it bad advice, although it certainly is less good advice than it was 3 years ago.
posted by schmod at 11:15 AM on April 22, 2010 [1 favorite]

Folks, this person lives in Toronto, Ontario, Canada. Much of your advice is very US - specific.

Oops, I just read the AskMe post itself and didn't notice the username and profile. Ignore my advice about the Roth IRA, but the rest of it should apply.
posted by burnmp3s at 11:16 AM on April 22, 2010

Best answer: Since you're debt-free, and you're not yet sure what to do, max out your RRSP. Yes, it's not in the least bit fun, but it's better to put $30K in when you're 27 than when you're 47.

If there's anything left, put the remainder in a TFSA or high-interest savings account. Chances are, you're going to come up with something better to spend your money on later on than you can come up with right now. You don't need to spend it right now. It doesn't sound like you have any reason to. So don't. Put some money aside, let it earn a little interest, until you have a use for it.

@burnmp3s: He's in Canada; a Roth IRA does not compute.
posted by mcwetboy at 11:20 AM on April 22, 2010 [1 favorite]

(Sorry, burnmp3s, I didn't preview before posting, and didn't see your clarification.)
posted by mcwetboy at 11:21 AM on April 22, 2010

A lot of people here seem to be recommending CDs or High-Yield savings accounts.

Right now, interest rates are the lowest they've been in ages. I'm not sure if that makes it bad advice, although it certainly is less good advice than it was 3 years ago.

Yes I should have mentioned that putting a lot of money into a long term CD would probably be a bad idea for that reason. But there aren't really any safe short term investments that will significantly outperform savings accounts, so if you aren't investing for the short term and can't handle much risks you're stuck with the bad rates for now. The positive aspect of a high-yield savings account over a CD is that as the rates get higher eventually you will start earning more money. On the other hand, when rates do get to a decent level again, locking in a longer-term CD at a certain rate can help reduce the risk of falling interest rates (at the cost of liquidity).
posted by burnmp3s at 11:24 AM on April 22, 2010

I would blow it on a world-wide backpacking travel adventure so quick your head would spin. But I'm financially irresponsible in hypothetical situations. In reality if I had that much I would buy myself a brand-spanking-new reliable car and put the rest into some high-yield savings account (ha) or get someone to teach me how to invest in stocks.
posted by LokiBear at 11:28 AM on April 22, 2010

Take yourself on a bang-up, three week vacation somewhere foreign. Either stay in one place the whole time and really get a feel for it, or go on a grand tour of Europe or somesuch.

Then do something sensible with the rest. I would make a downpayment on real estate somewhere affordable, and rent it out. In Houston, Texas, you can just about pay for a condominium outright in some suburban neighborhoods with that amount. Manchester, New Hampshire is another inexpensive area. There are probably places in Canada that would also work.

Down the road, you'll have a fairly reliable cash flow from it, regardless of what else goes on in your life.
posted by MexicanYenta at 11:33 AM on April 22, 2010

I'd take $3,000 and give it to Doctors Without Borders, place the rest in the best savings/money market account I could find, and sit back enjoying both the safety net I created for myself and the health and well being I created for others.
posted by leafwoman at 12:01 PM on April 22, 2010 [1 favorite]

Save it. You should always have at least 6 months income in reserve.
posted by Afroblanco at 12:18 PM on April 22, 2010

Best answer: Geez, call up a certified financial adviser and ask him or her! Don't go to your bank, either. What you need is an experienced person. There must be an Investors Group rep in your area, for example.

AskMeFI is a great place for answers to a lot of questions, but this isn't one you should rely on the masses for. You really do need an expert who can work with your goals (or lack thereof).
posted by neksys at 12:30 PM on April 22, 2010 [1 favorite]

Geez, call up a certified financial adviser and ask him or her!

Dunno about Canada, but in the UK those guys are essentially salesmen. You might get good advice out of them if you paid money to them and made sure they weren't on commission. But you might not.
posted by I_pity_the_fool at 1:14 PM on April 22, 2010 [1 favorite]

BTW if the question is "how should I invest on the stock market?", then the answer is "index funds". Always and everywhere.
posted by I_pity_the_fool at 1:15 PM on April 22, 2010

I spent about that on two trips (20 months total) of around-the-world travel. It was pretty amazing.
posted by Bunglegirl at 1:29 PM on April 22, 2010 [1 favorite]

Start your own business.
posted by WeekendJen at 1:39 PM on April 22, 2010

I would use up to $5k of it on an awesome vacation. After that, I would continue saving, and grow that remaining $25k into $100k one day, and after that $200k, and so on and so on.

At you age, 75% stocks and 25% cash/CDs.
posted by eas98 at 1:46 PM on April 22, 2010 [1 favorite]

You live in Toronto - I think you should save 1/2 the money and spend the other 1/2 on a boat, either a sailing boat or a speed boat if you like speed.
You can have fun for a few seasons and still have the option of selling it and getting at least some of the cash back at a later date.
posted by Lanark at 1:57 PM on April 22, 2010

Go see TD Waterhouse Canada and have a chat. (I do not work for them nor have stock in their company.)
posted by IndigoJones at 2:17 PM on April 22, 2010

"Put it in a high-yield savings account or money market account"

where does one find one of those these days??
posted by DMelanogaster at 2:44 PM on April 22, 2010

I am about where you are. I just . . . sit on it. I have my savings sitting in low-to-no-interest bank accounts and haven't really done anything with it. I have put some into retirement accounts, but I'm currently in a position where I am unable to do so because I am not earning money in the US. But having it there and accessible is real peace of mind. If I get into some sort of crazy accident or have a medical emergency, I am not worried about not being afford medical bills. If I find something that I really love and want to splurge on, I can do it without getting into debt. If my hypothetical car were to break down, I could get it fixed or even get a new car without feeling beat up about it.

It might be worth it to invest a reasonable amount in stocks somehow. Safe enough for about 6 months of expenses, and invest the rest so it has some more hope of gaining money. Of course, it may also end up with a loss, but it won't hurt you extremely. Buy a house if you really want your own house and you find a place you love and will stay in for a long time.
posted by that girl at 6:06 PM on April 22, 2010 [1 favorite]

Use it for a downpayment on income property, like an apartment building.
posted by conrad53 at 10:39 PM on April 22, 2010

I would go on a nice holiday and save the rest.
posted by lizabeth at 3:45 AM on April 23, 2010

Best answer: Call a financial adviser!

Invest in something secure!

Gotta have a safety net!

Man, fuck that shit. You ain't got a family and you have no idea how long that'll last. $30k is enough to live comfortably for two years in most of the world. Sell all your stuff and leave.
posted by borkingchikapa at 4:59 AM on April 23, 2010

As someone in more or less your exact situation, I'll tell you what I did: I put a good chunk of change in a conservative mutual fund while the Dow was low, and I keep the rest in a CD. That's it. I withdrawal only when I need things that are both expensive and necessary. Otherwise, I try not to touch it.

Ever hear of that test they give to kids, where they offer them one marshmallow now or ten marshmallows later? That's you right now.

Compound interest is a hell of thing. Most young people don't appreciate that. Many old people don't either. Yes, interest rates right now are low. Even still, if you start young, that money will grow at a steadily increasing rate for the rest of your life.
posted by dephlogisticated at 10:41 AM on April 23, 2010 [1 favorite]

Best answer: Honestly? Save it as a cushion and restart a new savings to be used for down payment, travel, etc.

The way the market is, can you live on $30k in a year because that's how long it takes to get a job (or longer).

Seriously, don't blow it. Save it and rebuild fun money in a separate account
posted by stormpooper at 1:30 PM on April 23, 2010

I work in real estate in Toronto. You could get into the market, buy an older, outdated house in an upcoming area close to the center and rent out the rooms while living there as well. Aside from that, you could take courses that interest you and travel here and there, just dont blow it, try to use it to leverage more gains or increase "capital", personal, social, physical or otherwise.
posted by inlimbow at 8:24 PM on April 25, 2010

Invest in yourself-- get private coaching or serious lessons/training in cool or profitable things. For me, I'd consider: entrepreneurship, race driving, public speaking, pistol shooting, dancing, dating, real estate investing, stock trading, Japanese language, welding, etc.
posted by sninctown at 6:13 PM on April 14, 2011

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