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This is question has been somewhat asked elsewhere:

However, I wanted to re-formulate the question for a different demographic. I am currently a graduate student in a US university with a $22,000 a year stipend (August - May, summer months can pick up additional work at university or elsewhere). My monthly rent (all in) is $675 and my living expenses are about $150. After some startup expenses (furniture, moving, etc.) I am at a stable earning-saving pace.

My question is: What financial instruments should I prioritize to maximize the minimal savings I can accumulate over the next 4-5 years?

I have minimial student debt (less than $5000) and a Vanguard Roth IRA with $3500. My savings account, having just stabilized, is about $1000. I have no emergency fund.

I am able to save between $600-$800 a month so far. Should I be pouring all of that into the Roth? Or splitting it 50/25/25 (Roth, savings, emergency fund)?

Any insight would be greatly appreciated! Can post additional info if needed.

Updates from comments:

What are your goals?

To build up a savings strategy that makes sense for me. I am not inclined towards markets/finance, and often find myself accusing decent sums (1k-5k) yet doing little with it. Ideally I would like to exit this program debt free with some savings built up.

Do you have family or other resources to fall back on?

Yes, I am fortunate enough to have decent enough family resources should anything terrible happen.

How is the job market for your field of study?

Strong. I am in a quantitative social sciences field with background in statistical programming, database management, and project leadership.

What is the interest rate on your student debt?

3.6%

Chris W. Rea
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So I would ask another question. After this degree what do you intend to do?

If you intend on going into industry, I would be saving the bulk of it in a online "high" interest savings account. This would be used for covering moving expenses, or expenses associated with starting the new job. In a pinch, if things go south with your education financing plan, they could also be used to cover those expenses.

Once you are settled in the new job/location I would use the bulk of the funds to kill the student loan. However, your income will probably rise so dramatically that you will eclipse any efforts you made until that date to pay off debt or invest.

No big deal if you wanted to throw a bit extra (like 50 per month) at each the loan and ROTH. In these kind of cases, I prefer a concentrated approach.

If you were going to continue your education, then I would mostly forget about the ROTH and the loan if the interest rate is differed. I would just save, save, save in that same high yield savings account. This way you have a buffer to help you to complete your education. If your interest rate is not differed, I would dedicate all my savings to paying off the loan, and then savings. With focus you will have no student loan in less than 10 months.

Pete B.
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1) Build an emergency fund. If you encounter some unexpected expense and are unable to pay it off you risk incurring a high interest loan or damaging your credit score which could negatively impact your future. I recommend having enough money to cover at least 6 months of expenses (rent, food, utilities, day-to-day expenses). Park your emergency fund savings in a Money Market fund which will earn you 1-2% per year interest while keeping your income liquid.

2) My personal preference would be to pay off my student debt, mostly because I don't like having debt. But your interest rate is quite low, and payments on student loans can generally be written off so this isn't absolutely essential. Only worry would be if you can't make enough money to make the required payments in which case your credit rating can be hurt.

3) Start saving. Max out your Roth every year and start putting the remaining in a savings account. I would recommend investing it in a total stock market index fund like VTSAX and reading about index stock investing (personally I like "JL Collins" and "Mr. Money Mustache"). This should earn you about 10% per year.

4) Pay off your student loan if you haven't already done so.

Dugan
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