Investing your Stipend/Fellowship/Scholarship

[superboy]

How do you guys manage your stipend/fellowship/scholarship? Is financial management of your (very) limited resources different from that of a person going out to the real world to work? Do you feel that you have to take loans to supplement your income at different times of the year? Do you invest your money in mutual funds, money funds etc? =)

[rising_star]

I get paid monthly. I don't take out student loans. You budget your monthly stipend like you would budget a paycheck. It's not rocket science, really. And no, I don't invest my paycheck in mutual funds because I spend most of it, could need the rest of it, and am not willing to deal with the ups and downs of the stock market.

[euges429]

I get paid monthly. I don't take out student loans. You budget your monthly stipend like you would budget a paycheck. It's not rocket science, really. And no, I don't invest my paycheck in mutual funds because I spend most of it, could need the rest of it, and am not willing to deal with the ups and downs of the stock market.

That's actually quite stupid, really. If you really had no money left over at the end of the month, then of course, you shouldn't invest. But it's always a good idea to invest, especially when we're in our 20s (I'm assuming you are), since it'll be invested for the long-term, ride out the waves of the stock market, and take them out in 40 years or so. You'll be rich! Well, not rich, but you would be better off, financially-speaking. (Unless you choose terrible stocks, but that's why investing long-term has its benefits.)

[rising_star]

That's actually quite stupid, really. If you really had no money left over at the end of the month, then of course, you shouldn't invest. But it's always a good idea to invest, especially when we're in our 20s (I'm assuming you are), since it'll be invested for the long-term, ride out the waves of the stock market, and take them out in 40 years or so. You'll be rich! Well, not rich, but you would be better off, financially-speaking. (Unless you choose terrible stocks, but that's why investing long-term has its benefits.)

I have some money set aside in a IRA. But I'm not investing my stipend in hopes of making more money each year or anything. I'm just extremely frugal. And yes, investing while you're young is great but no one should count on that while in grad school, imo.

[boringname]

Unless by "invest" you mean "put your money somewhere besides your mattress," then no, it is by no means stupid not to invest the paltry amount of stipend you're able to save. (Hmm, enough negatives there?) Although you can afford to ride out the ups and downs of the stock market if you really won't be needing your money for a long time, you can't take as many risks if you're likely to need your money within the near future.

But kudos if you've won a stipend that allows you to day-trade....

[superboy]

Thanks for all those answers. It is interesting to hear that many are postponing their long term financial planning to after graduate school - which means that planning for most for the future starts only in the late 20s? I am not necessarily saying that any graduate student can get a stipend that allows them to day-trade (maybe business ones..who knows). But being able to buy some cheap long-term bonds and very low risks CD might be a good way to beat inflation on your dollar?

Would anyone share something more specific - like how much do you save per month? Anyone take out student loans to cover your expenses?

[rising_star]

Thanks for all those answers. It is interesting to hear that many are postponing their long term financial planning to after graduate school - which means that planning for most for the future starts only in the late 20s? I am not necessarily saying that any graduate student can get a stipend that allows them to day-trade (maybe business ones..who knows). But being able to buy some cheap long-term bonds and very low risks CD might be a good way to beat inflation on your dollar?

Would anyone share something more specific - like how much do you save per month? Anyone take out student loans to cover your expenses?

I think that depending on your stipend and living situation, it may not be possible to have money leftover to plan one's financial future. Furthermore, I would argue that being in graduate school IS taking a step towards long-term financial planning. A lot also depends on where one is in life. If the only way one could save money was by taking out a student loan, I wouldn't advise that and I doubt most financial planners would. Yes, it's important to save for retirement. Yes, every little bit helps. But if the choice is putting groceries on a credit card/student loan or saving that $50 for retirement, I'm always going to go for eating now. The future won't matter if you shortchange your diet and health now because you won't be around to see it.

Another thing, most long-term bonds and CDs have a minimum investment of like $1K. When you're paid monthly, it can take a while to accumulate that sum just to enter into the investment. If you're saving it by not spending money on healthcare, good food, books you need to read/building up a library, or not going to conferences, I don't think that pays off in the long run. Investing in one's financial future is about more than just money.

[superboy]

Investing in one's financial future is about more than just money.

Thanks rising star. Really good points about forgoing present income for potential future gains (assuming that there is some presumed linearity in our career path). I guess it also depends on whether you are single, attached, married or have children too. I imagine that singles and married couples without children have more leverage on their stipend amounts.

[miketakena]

Thanks rising star. Really good points about forgoing present income for potential future gains (assuming that there is some presumed linearity in our career path). I guess it also depends on whether you are single, attached, married or have children too. I imagine that singles and married couples without children have more leverage on their stipend amounts.

Hi Risingstar and Superboy, I have a solution that let you have your cake and eat it...

What risingstar said about paying your bills with cash and not credit is absolutely right. What superboy said about starting early to invest for one's future is absolutely correct too... And having an emergency fund is the #1 rule in financial planning ....

Thus, if you could just save up for an emergency fund during grad school... and any immediate cash outlays can be paid out using this $ (and then u hv to top it up later)... I bet you can't save too much of emergency fund over your whole grad school life... And if you do... you could then dollar cost average into no load mutual funds!

Have your cake and eat it too!!

[zigazowohnow]

It's nice to see I'm not the only one thinking about savings and a graduate student stipend.

If I get an NRSA from my institution I'm not sure if I can put it into an IRA... If not that means I could go for the next 4-6 years without being able to fund an IRA...that's freaking me out!

[silencio1982]

i'm going to take a break from contributing to my IRA, but still plan on putting some money into savings. i have a high interest savings account (well, about as high interest as you can get nowadays) and take advantage of CDs through my bank... my husband and i have a "buy a house" fund which is in a CD. but, as far as my grad school stipend goes i have budgeted to continue paying on my student loan debt (approx 14% of my stipend per year, if i keep paying at the rate i am now) and set aside 1/10th of my stipend in savings. the rest will go to living expenses. if i were just living on a stipend and didn't have my husband's income to rely on, i don't think i could save anything and would probably have to put my loans into deferment. you all must be getting some pretty big stipends!

[Biologic]

I also will be paying towards my student loans with a portion of my fellowship during my Ph.D. My wife and I will most likely be purchasing a house when we move for my program this summer, and we will be selling our current house (hopefully!). So in that regard, I will be investing in real estate for the duration of my grad studies. Bad time to sell a house, but a great time to buy one if possible. This will be our third house, and I have to say, after selling our first house, we made a nice amount off what we invested in 4 short years. We may not have such luck this go round, but it seems likely we will get what we have in it out (and hopefully more) to put towards the next down payment if all goes as planned. Even in bad times, appreciation of real estate can be surprising.

[UndraftedFreeAgent]

Now for a more on topic post...

I don't think investing is really an option for most of us. Stipends are generally calculated to cover living expenses and not much more than that. If you can keep (or start) contributing to an IRA, more power to you, but that won't be the experience for most grad students. Though if there is as big an influx of grad students in the next year or so as has been discussed in other threads, maybe we should invest in Ramen futures hahaha.

One thing that you will want to consider though, is putting together an emergency fund in case of injury, car accident/repairs, needing to take a sudden flight, or other major events. Even if you have insurance, you'll still likely have a large deductable to cover, which can completely destroy your finances if you are not prepared. If you can put $100 per month (or whatever you can afford) into a savings account, that can go a long way towards protecting yourself against major expenses.