[School me ON] personal finances!

VeritasVR

I just started a full-time job at a company, and they have all these benefits including their own federal credit union. Now, I currently use a bank. And I have a student loan.

The impression I'm getting is that the FCU has a higher interest rate when you open a savings account. My situation is this:

-I have been very frugal.
-I've survived 4 years on a shoestring budget.
-I want to maximize the bang for my buck for my time. (ie, I don't want to lose money on stuff like interest rates for loans.)
-The interest rate for my student loan is greater than the interest rate for the FCU savings account (I'm assuming.)

So am I wrong in thinking that to maximize my money, that I should pay off my loan as fast as possible, then open up an FCU savings account? There'd be no point to do both at the same time right? Since I'm technically getting a NET LOSS in my interest by having the outstanding loan? For example: FCU {+6%} plus Loan {-10%} = Net {-4%}

Also, is there a catch I'm not seeing here? Do banks do something that FCUs don't? And what's the deal with Roth IRAs vs. 401(k)s and all that jazz? I'm being matched at 100% for 3% of my salary... is that good?

Yeah. Lots o' questions. If you can help for anything that would rock.

honkymcgoo

The only difference Ive ever noticed from people who had credit unions was that if direct deposit went out on friday, they didnt get it till monday sometimes.

Thanatos

First thing is first: max out your 401(k). You're getting 100% instantaneous interest on that first 3% of your salary you contribute, so there's your best place to start.

Credit union savings accounts are really, really overrated. Odds are, you'll get a better rate from ING. Nothing wrong with doing your checking and getting a credit card through them, though, their fees usually aren't as bad.

What is the actual interest rate on your loan, and how much money are you going to be making? Since loan interest is an above-the-line deduction on your taxes, the interest rate on your loan is actually significantly lower than it looks, depending on what the highest tax bracket you land in is.

Now, past your 401(k), you're likely going to be better off in the long run dropping your money into a Roth IRA than paying down your loan beyond the minimum payments (I'm guessing you're in a lower tax bracket), since that interest rate is de facto so low.

RUNN1NGMAN

If you don't have anything in savings, that should be your number one priority. You're walking a tightrope without a safety net. Until you have AT LEAST enough to live on for a month (rent, food, utilities, etc) put all excess money into a savings account. Your math is technically correct as far as comparing paying off your loan and saving the money, but there are other factors you need to consider, like do you have enough money to fix your car if it breaks? Or cover your insurance deductible if you're in an accident?

After you get that in order, start paying into that 401(k) but only as much as your employer is matching. It comes right out of your pay, so you'll never miss it. Everything else should be going towards paying off your loans, except a little bit each month to build up your savings. Ideally, you should have enough in savings to live of it for three months if something bad happens, like you lose your job.

There's nothing magical about credit unions. You get a slightly better interest rate because it is owned in full by the members (you and everyone who banks there). Otherwise they're the same as a regular bank.

A Roth IRA is something good to be thinking about, but honestly if you don't have any savings at all you shouldn't be worrying about it yet. For the future, a good strategy for retirement savings is put whatever your employer matches into your 401(k) to get as much of that free money as you can, then max out your IRA contributions.

www.fool.com is a really good resource. They do a good job of explaining the complicated financial stuff.