It’s my favorite time of the semester. About this time, USF distributes tuition reimbursements.
Whether you have Bright Futures Scholarships, student loans or a branch of the military paying for your education, USF is giving the difference back to students this week. Some students are receiving a few hundred dollars; others get up to four digits deposited into their bank accounts.It must be very tempting to know that a few hundred dollars you never intended on seeing will soon be taking up space in your wallet. There may be an evil, Jiminy Cricket-like voice inside your mind persuading you to spend that money.
“You budgeted around that money. You never expected that money to be there,” the wicked voice tells you. “You can spend it as though you don’t need it.”
And while that iPod Nano or an extra subwoofer for your truck may have been on your wish list for months now, I think everyone will agree that a spending spree is not the most responsible option. Most college students would just blow that money, but you’re above that. You’re an adult: Your education and maturity won’t let you spend that money recklessly.
You may ask, “Then what should be done with this extra money?” Sure, it may be easy to shove it into your meager interest-bearing savings account. But you and I both know that when times get a little rough or some material thing becomes too appealing, that account – which didn’t yield much interest in the first place – can easily be emptied and the money can just as easily be spent carelessly. And since we’re trying to avoid that, I have some suggestions that may elevate you above the common, financially irresponsible college student.
If you’re one of the lucky ones, you’re getting four digits back from your tuition payment. You have many more options than those who were only refunded a few hundred dollars. Ideally, you would invest your money in many diverse funds. High-yielding stocks and secure bonds would make the most of your money in the shortest amount of time. But let’s be realistic: Most students don’t know as much about the market as one should before investing, nor do they have the budget to hire an investor to do the work for them.
So, an easier – albeit less profitable – option is a certificate of deposit, known for short as a CD. A CD is an interest-bearing savings account with a twist. The standard savings account is open ended, with no time constraints. A CD generates a higher annual percentage yield (APY) than a savings account, but with a twist: When opening a CD, you sign a contract stating that you will not touch your money for a predetermined amount of time. Be it six months, nine months or two years, your money is out of your hands and working for you.
Should you change your mind and withdraw before your account reaches maturity, you are monetarily penalized. Some financial institutions will not open CDs without a $10,000 minimum deposit, but others will let consumers open accounts with a minimum of $1,000.
For those receiving a few hundred dollars back, a wise idea is to invest in a savings bond. They take years to mature, but once they reach maturity, they can double or even triple in value.If you feel like you will truly need this money in the near future, a money market account may work in your favor. These combination savings-checking accounts yield interest, but allow for a limited number of checks to be written every month. (At my bank, for instance, one can write three checks every month).
Until you need it, the money will work for you in this account. However, it’s available should an emergency arise – or just in time to pay for summer tuition.
It is always sensible to contribute to an IRA or 401K, no matter how much or little money you have. Don’t have one yet? Some financial institutions will allow you to open one with as little as $100 and, for a short period of time, will match every dime invested. If you don’t have one of either account yet, you need to look into it. The future of Social Security is another column, but it’s safe to say that you should be prepared to fund your own retirement. It’s never too early to start. You’ll thank yourself on your 65th birthday.
I’m not suggesting that you do not spend any refund money on yourself. If the money comes from scholarships, you obviously work hard enough to retain that source of income.
However, if there is any lesson we can learn from our parents’ generation, it’s that debt traps and the paycheck-to-paycheck lifestyle of the archetypal new college grad can be avoided by taking intelligent precautions while in school. Besides, if you make your money work for you now, in the future, you can make your money play just as hard.
Taylor Williams is a junior majoring in English education.