The Best Ways to Handle Earnings From Your Summer Job

NEW YORK (TheStreet) -- Whether it's lifeguarding on an idyllic lake, flipping burgers or sprucing up the landscape, a summer job can give a teenager or early 20-something a first exposure to working life -- and a chance to learn the ins and outs of handling money.

Ideally, the summer job provides pocket money to carry a young person through the year. But it can also be much more important, helping to pay for college or to build savings for a major purchase such as a car. What are the options for handling this "serious" money?

For short-term needs, choices are pretty simple given the rock-bottom earnings offered by interest-bearing accounts. Though you might earn twice as much with a bank money market account instead of a checking account, the earnings are so pitiful it hardly matters: 0.095% in a money market, 0.045% in checking.

You could earn nearly 1% by tying your money up in a 12-month certificate of deposit, but that's still so little -- $30 a year on $3000 in savings -- that it would hardly offset the inconvenience of keeping your cash off-limits for a year.

In recent years, the big earnings have been made in the stock market, but that's too risky for money you may need quickly.

Young people attending college, or planning to, could put summer earnings into a Section 529 plan, which offers tax-free treatment of investment gains. But, again, if the money will be needed in just a few years, the best 529 options, such as target-date funds, would invest your cash so conservatively they probably would not grow very much. A 529 is best started when the beneficiary is very young, providing time to benefit from stocks and ride out the downturns.

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