What to Do With Found Money
If you’re lucky enough to find yourself in this situation, take advantage of the opportunity to invest in your future.
Laura Adams, MBA
Q. I’m a college student who recently came into a little bit of money. I’m wondering what is the smartest way to invest it for my future?
Answer. No matter your age, when you have some spare cash, the first question you should ask yourself is whether you have an ample emergency fund. An emergency fund is critical to your financial health because it’s how you can survive a financial catastrophe like a medical bill that isn’t covered by insurance, an expensive car repair, or not getting a job as quickly as you’d like. You must resist the temptation to spend your emergency money on anything except a bona fide financial crisis.
Even though you’re still in college, it’s a great time to get a head start on your emergency fund. You shouldn’t invest your emergency money because that exposes it to some amount of risk. Instead, keep it in a very safe FDIC-insured savings or money market account. You need to have somewhere in the range of 6 to 12 months’ worth of living expenses socked away. For example, if you estimate that you’ll spend $2,000 a month after graduation your goal should be to have at least $12,000 on hand. Building up your emergency fund might not seem like an exciting financial move, but it’s a smart one that will ensure your financial security.
Click here for emergency-money-for-a-new-economy for my full episode about emergency funds, and how to get the best interest rates on your savings accounts for my tips on finding the best interest rates for a savings account.
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.