Author Topic: Saving for grad school- money market, index fund, something else?  (Read 2666 times)

organicolga

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Saving for grad school- money market, index fund, something else?
« on: September 28, 2014, 03:57:18 PM »
Hi everyone,
I'm a 23 year old who found MMM about 2 years ago and feel so lucky that I did- Iíve been reading and saving like crazy since.
I'd really appreciate some advice about where to hold my savings for grad school. More details and background:

ē   I'm currently employed in the environmental field, which I love, but my pay is embarrassingly low (why does good work always mean abysmal pay?!). I want to stay in the field, but Iím pretty sure I need to get more technical expertise in order to get to do the kind of work Iím ultimately interested, and hopefully be better paid. Hence the desire to get an advanced degree.
ē   The program would be a Masters of Science in Environmental Management, and I want to start in fall of 2015.
ē   Tuition for good schools with this degree program varies greatly, from a total of $30,000-$75,000. Iím also applying abroad, since programs are both cheaper and shorter.
ē   I have about 40k saved in my credit unionís money market account (does this deserve a face punch?)
ē   Iíll find out exactly how much money I need for grad school in March-April of 2015. Most likely I will need all that Iíve saved, although my fingers are crossed for grants/scholarships to help cover costs.

So the question is: in the meantime, where should I be holding this money? Is the money market okay? Should I be investing it? Iíve been hesitant to put it in an index fund because I need it in the short term (1-3 years), and definitely donít want to lose anything.

Thanks in advance for any thoughts and advice you may have!

Kwill

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Re: Saving for grad school- money market, index fund, something else?
« Reply #1 on: September 28, 2014, 05:41:25 PM »
I can't speak to the investment question, but I wanted to comment on the plan. I'm afraid you might find yourself at the end of the program having no better job prospects but having spent all your savings and a year of your life.
My suggestion would be to look at job ads in your desired field and see what qualifications are requested. Also think of side directions where a different kind of degree might open possibilities. If the degree in environmental management seems best, could you apply for PhD programs instead? Generally PhD students don't pay tuition and sometimes get extra funding for living expenses. But if you quit a PhD program after 2 years, you may get a master's degree for the work completed without an obligation to pay back the funding. It's harder to get in, but with your work experience in the field, you'd might look like a better risk than someone just finishing college. PhDs have their own problems, though, so look into all the possibilities and risks before you commit.

mlipps

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Re: Saving for grad school- money market, index fund, something else?
« Reply #2 on: September 28, 2014, 05:53:38 PM »
I would check into any possible 529 plan tax breaks given in your state. If you plan to go next year, I wouldn't invest the money persay, but I think Virginia maybe? has a 529 plan with a crazy high money market fund. Some states (like IL) require you to invest in their own state's plan to get the tax break though.

Also, I would only contribute your expected costs less $10,000 for each calendar year the program will last. So, for a 2 year Master's program that starts in the fall, I would contribute expected costs less $30,000. This is because the max. Lifetime Learning Credit each year is 20% of $10,000 and you should be able to time the payments in such a way to more or less max this out for each you're in school. However, that assumes you'll still be working & have taxable income as the LLC is non-refundable. If you won't have $2,000 in tax liabilities each year you're in school, you should accordingly put more into the 529 plan if it gives you a state tax cut now.

ragnathor

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Re: Saving for grad school- money market, index fund, something else?
« Reply #3 on: September 28, 2014, 06:44:00 PM »
I agree with the comment about thoroughly investigating job prospects with the master's degree.

Beyond that, I would consider sticking the money in an IRA. Someone please correct me if I'm wrong, but I think money in an IRA does not count as assets for financial aid while a 529 will. This may reduce your need-based eligbility when being evaluated for grants.

mlipps

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Re: Saving for grad school- money market, index fund, something else?
« Reply #4 on: September 28, 2014, 07:25:22 PM »
I agree with the comment about thoroughly investigating job prospects with the master's degree.

Beyond that, I would consider sticking the money in an IRA. Someone please correct me if I'm wrong, but I think money in an IRA does not count as assets for financial aid while a 529 will. This may reduce your need-based eligbility when being evaluated for grants.

True. You can take up to $10k/year out of a TIRA without penalty if used for educational expenses, but you still have to pay income taxes. So, if you're not currently maxing your IRA AND you don't plan to have much income while in school, putting some of it into a TIRA might be a smart move. Or I guess you could put it into a Roth for simplicity, but then you lose the tax rate arbitrage.

highcountry

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Re: Saving for grad school- money market, index fund, something else?
« Reply #5 on: September 28, 2014, 08:32:32 PM »
I am in a similar field, and am not currently at the point where I am ready to go for a masters, however I have repeatedly been told by professionals in this field that "if you have to pay for your own masters you aren't a good enough student to be thinking of grad school". I don't have first hand experience with this, but the number of fellowships available is very high. Get yourself on the ecolog listserv and start applying.

4n6

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Re: Saving for grad school- money market, index fund, something else?
« Reply #6 on: September 28, 2014, 09:07:51 PM »
I would stick the money in an IRA and look to fund the master's degree another way. Have you investigated an assistantship? Most universities have some form of assistantship (RA, TA, or GA). You receive a stipend, tuition waiver, and often health insurance. It can often be done part-time. There all kinds of different assistantships you can do in the university. It sure beats paying for your education.

peppermint

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Re: Saving for grad school- money market, index fund, something else?
« Reply #7 on: September 28, 2014, 09:22:15 PM »
I am in a similar field, and am not currently at the point where I am ready to go for a masters, however I have repeatedly been told by professionals in this field that "if you have to pay for your own masters you aren't a good enough student to be thinking of grad school". I don't have first hand experience with this, but the number of fellowships available is very high. Get yourself on the ecolog listserv and start applying.

+1. Particularly, if you are applying for grad school to start fall 2015, fellowship applications are due in the next couple of months (before program applications) so you want to be preparing your fellowship materials now.