Student Loan Dodgers

One of the biggest financial mistakes students make is not setting aside money in savings. Saving money is not only a good habit to get into, it will also help stabilize your finances when unexpected expenses (or opportunities) arise.

The simplest approach to saving is to deposit cash into a savings account. Some people choose to save a certain percentage of their income each time they get paid. If you regularly save 5 to 10 percent of your paycheck, no matter how small the check might be, you’ll soon discover that you’ve accumulated a healthy sum.

Once you’ve established a nice balance in your savings account, you can move into other savings and investment vehicles. The safest savings options include savings bonds, treasury bills and certificates of deposit. You can buy savings bonds and treasury bills directly from the Federal government with no additional fees or charges. Treasury bills (also called “T-bills”) can mature quickly – in as little as 13 weeks for individual investors. Savings bonds take several years to mature. When you sell either of these securities, you will be liable for taxes on the gains. Savings bonds issued by the Federal government are exempt from state and local taxes, but you still have to pay Federal taxes on your earnings.

Certificates of deposit are available through a bank, and require depositors to leave their money invested for some fixed period of time, usually 6 or 12 months. Some CDs have longer maturity periods. Usually with CDs, you can’t withdraw your money early without incurring a penalty, so you’ll need to be sure that you can afford to tie up your savings for the designated period of time. CDs usually pay a higher interest rate than regular savings accounts do.