Help!

[theDetroitKid]

My mom just gave me $10,000 to help pay off my student loans. I am currently in school and these loans do not start earning interest until I graduate, which is June 2007. What is the best way to earn interest on this 10K in that time frame? I was thinking about putting it in an S&P500 index fund (ETF). What are my other options and what is the best for this situation?

thanks for your help in advance

You've got two options: Blackjack or roulette. [img]/images/graemlins/wink.gif[/img]

Ok now seriously, if I had 10k I'd just put it in a CD and get their low interest rate because it's guaranteed. However, I'm a real newb and just read like 2 books. One of the books I read said that you can lose money in index funds over the short term (your case), but over the long term it's a good investment.

Yeah, you definitely don't want to lose money in this situation. You don't have any earning power, and you won't have much for a couple years after you graduate, so you can't make up losses very easily. Just stick it in 2-year CD. Shop around for the best rate or incentive.

If you saw Bowling for Columbine, you'll know that some banks will give you a gun for buying a 10k CD with them. [img]/images/graemlins/smile.gif[/img]

[squiffy]

I agree. Standard advice is don't put money on the stock market unless your time horizon is 5 years or more, because you can easily be underwater in the short term, especially if we go into a recession.

Retirees and people who will need their money soon should generally pick something safe and secure. With a one-year CD you will keep pace with, or slightly beat inflation, and the money will be there when you need to pay off your students loans.

When you pay them off, you will get a guaranteed savings of whatever interest rate you are paying off, say 5% or 7%. What are your rates?

www.bankrate.com for best national rates. You might want to pick a 1 year or 6 month CD and just roll it over, as rates seem to be rising.