Seed Money
Gavin Schmidt | Feb 4, 2023
MONEY IS OFTEN TIGHT for those in their 20s. Yes, that first “adult” job typically pays more than any previous job. Still, finding money to save and invest can be tough. After handling all the other big expenses of early adulthood—house, wedding, student loans—there just isn’t much money left over.
That’s my dilemma and one facing many others in their 20s. How can we make extra money without getting a second job? My fiancée and I focus on earning money just by living. Here are five tactics we use:
- High-yield savings accounts. In the current environment, these accounts are a no-brainer, with many currently paying well over 3.5%. Most have no minimum balance, worry-free transfers and charge no fees. Currently, we earn roughly $60 a month on our balance of more than $20,000.
- Credit cards. Yes, these are easily abused. But if you’re diligent about paying off the balance in full, there’s no reason not to use one. Nearly all big retailers offer a card that rebates 3% to 5% back for store purchases and perhaps 1% elsewhere. Fidelity Investments even has a card that gives 2% cash back on all purchases, with the money going straight into your brokerage account. I’ve had an Amazon card for nearly five years. As a couple, we also use the Costco card, which refunds 4% back on all Costco purchases with the gold membership, plus 4% back on fuel up to $7,500 a year. Between our Costco and Amazon credit cards, we get roughly $40 back per month.
- Treasury bills. These are a risk-free way to earn interest. Treasury rates vary with each auction, but are typically slightly higher than high-yield savings accounts. Treasury bills are sold in increments of $100. Maturities range from four to 52 weeks, with auctions occurring each week. We buy four-week bills every week, which means every week some of our four-week bills also mature. The most recent auction for a four-week bill was well over 4%. We buy anywhere from 10 to 50 bills per month, equal to $1,000 to $5,000, and might collect $4 to $15 per month in interest.
- Money back apps. There are numerous apps out there that’ll pay you to share your receipts. For instance, we use Upside, an app that gives us cash back when we buy fuel at certain gas stations or eat at select restaurants. All you need to do is share the last four digits of your credit card or upload the receipt. The cash back can be directed to your bank account or a gift card. Pairing this with the credit card rewards can mean a handsome return on each purchase. We’ve gotten anywhere from $20 to $40 back each month with the app.
- Donating plasma. There are many donation companies that collect plasma. Although this takes time out of your day, it’s an easy way to earn extra income that can then be dedicated to investing. We live near a relatively busy clinic. Each visit can take up to two hours. Donating twice in a week means an extra $150.
All this might seem like relatively small potatoes. But even small investments in the financial markets each month can have a big impact over time—especially if you’re in your 20s and have many decades to invest.
Gavin Schmidt is a supply chain analyst for a Fortune 200 company. Fascinated by the economy, and by business and consumer decision-making, he became interested in personal finance and investing early in life. Based in Minneapolis, Gavin’s interests outside of finance include reading, being outdoors, fitness and music.
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As someone in my 20s who recently first started my first salaried, “adult” job with benefits, the question of how to make more money without picking up a 2nd job is something I’ve been thinking about, particularly as heating and groceries costs surge. I haven’t yet looked into treasury bills and money back apps but I will make sure to.
Great article. I’m glad to have young voices here!
Your point about donating plasma caught my attention. As I get older I found that I have medical issues that now prevents me from making blood donations or selling plasma but I am grateful for those who do. Americans would not be able to have many life saving medical procedures and certain medical research without the willingness of donors to provide blood and blood products.
I have read parts of a 2022 FDIC report titled Blood Money: The Financial Implications of Plasma Sales for Individuals which noted in 2019 US donors provided 64% of the world’s plasma supply and that report estimated the number of donors were just 2.5 to 3.7 million people which would be less than 1% of our population.
Appears you are doing good while doing well.
Best, Bill
Hi Bill, Thanks for the response. I recently re-watched Band of Brothers and this was a sticking point with me. Plasma is used in multiple scenes. It was not something I was aware of until I researched the topic more.
Is the income from blood donations tax free?
Hello, The site I go to does not provide the 1099 form. However, this would still be reportable income under a 1099-misc if the individual made over $600.
I recently ran across something that (sort of) combines high yield savings accounts with T-Bills.
Ivy Bank has an “indexed” savings account that is indexed to the 1-month T-Bill rate. It currently pays 4.71%. (Note: they have a regular and an indexed one.) The indexed one is interesting and I have not seen other bank accounts that are similarly indexed before.
Hi Nate, Thanks for the response. That is an interesting concept. I’ll have to look into that. TreasuryDirect recently improved, but still not the most optimal.
You can also usually buy treasury bills through your broker. At least, I know you can at Fidelity and it is much easier to navigate than TreasuryDirect.
Thanks for the link. I’ve never seen that before either and it looks tough to beat on an apples to apples basis.
No problem. It is technically indexed to the “Daily Treasury Par Yield Curve Rate“ which can be see at the US Department of the Treasury site. You have to find the rate for the 15th of the previous month, or the first date after the 15th if it is the weekend. In this case, it is January 17 (for February) and the rate is listed at 4.60% Then you use an interest (APR) to APY calculator (for instance) and make sure you are compounding daily and it spits out 4.71%
That was probably entirely too much detail, but it shows that you can figure out what the rate will be around 2 weeks before the beginning of the next month. (For instance if rates crashed on your money market account or something, you could always choose which is higher.)
Enjoyed the article Gavin. Glad you got the memo on credit card debt much earlier in life than I did.
$150 a week from plasma!? Wow.
Interesting use of 4wk T-bills. Since you’re already at Fidelity, worth mentioning that their premium money market fund FZDXX gets you almost the same rate without the auction hassle and better liquidity. It’s getting 4.3% and the four week at last week’s auction was 4.5%. The T-bill interest isn’t subject to state tax, so living in a high tax state would add to their appeal.
Hi Michael, Thank you for the response.
Another comment had mentioned FZDXX as well. Based on my brief glance, it appears to have a minimum investment of $100,000. I’m not quite there yet. I very much enjoy interacting with Fidelities investment tools. Thanks for the tip, I’ll research the options they offer.
Yes that’s correct. But it’s a minimum initial investment, not a minimum balance. Once in, can pull a portion out and still keep getting the interest rate on what you keep there.
Btw, in another comment I see you mentioned Treasury Direct improving. Assume you know, but just in case… you can buy your T-bills through Fidelity as well, much simpler than TD.
It looks like there’s a 0.36% expense ratio for FZDXX. If that’s subtracted from the 4.3% yield (I assume that’s how it works), then the difference here is 0.5%.
While four weeks is not long to wait, the author has laddered their purchases of the T-Bills into one-week increments, so they will always be able to access a portion of their investment within a week.
For me, I’d rather have an extra 0.5% yield for a very small sacrifice in liquidity.
The stated yield is after accounting for the expense ratio.
Why T-Bills and not a money market fund (maybe FZDXX, current 7-day yield of 4.39%) or as your #1 above references, a no risk/FDIC-insured, high-yielding online bank money market account (found on Bankrate.com, like Bask Bank at 4.25%, or MySavingsDirect at 4.35% currently)?
I agree and have our liquid reserves in FZDXX. This writer appears to be aiming for readers who are unable to save much so they may be unable to start with the stated $100k minimum initial investment in FZDXX (unless that $100k figure isn’t strict)
Good column, with some useful suggestions for maximizing funds.
I use T-bills for my “irregular expenses” budget. I need $x for car taxes due in March, $y for travel to family event in May, $x for road-trip planned for September, etc. My budget includes saving for those irregular expenses, so I park the money in T-bills where it can earn a bit of interest.