CLtotheTL32

iTrader: (3)

Over the last week or so in my business class, the professor has been encouraging young people to start saving. He's shown charts and graphs showing how starting young benefits you in the long run.

I've discussed it with my parents and they both have different opinions. My dad didn't start saving until his mid-30s and he regrets it. He wants me to start early so I'm not freaking out when it's time to retire. My mom on the other hand doesn't think it's necessary. She wants me to save but wants the money to be easily accessible if needed in an emergency situation.

I don't plan on putting much each month into the fund, maybe $150 or so. Something is better than nothing right?

Any advice would be greatly appreciated

juniorbean

iTrader: (5)

You are never too young. I have had a fund of some sort (401k and mutual) since I was 17 years old.

Never invest if you cannot afford it b/c your mom is right, you need some money accessible to cover obligations and in case of an emergency, etc. But if you have a few extra bucks here and there it is definitely wise to invest it for your future

GIBSON6594

younger the better

gatrhumpy

iTrader: (1)

Before you invest, however, make sure you research several different options. Talk to a certified financial planner about your options. Most times, they will hail you for coming in so early in your career to do that. I started at 22, and am glad that I did.

doopstr

If your parents are flipping the bill for your education you should do whatever you can to sock away money since your expenses are low. The $150 a month you propose will add up quick. Once you leave the nest you can take some money out of the fund and put it into cash for your emergency fund.

NSXNEXT

iTrader: (2)

Portion control. You need to create a balance.

Of the money that you SAVE...

1) % for liquid savings - savings accounts, emergency funds, play money
2) % for short-term investments - saving for a house, car (<5 yr goal)
3) % for long-term investments (retirement 401K, Roth, IRA) - money you won't touch till you retire

At your age, I would go:

1) 50% - once you graduate college and get a job and a place to live, this money will dissapear very quickly
2) 40%
3) 10%

If you already own a reliable car, use #2 just for a house fund.

crazyasiantl

iTrader: (7)

never too early to start. my grandparents have a mutual fund for me still, one small one and a larger one that i havent touched.

if your employer offers 401k, go for it. ive had 401k since i was 18.


never too early to save for your future

Will Y.

1) Put the money into a separate "high" interest rate savings or money market account for now; an on-line account is good.

2) Research mutual funds and IRAs, then shift the bulk of the money from the savings/money market into the funds & retirement account when you are comfortable. The mutual funds can lose principal like stocks, but the potential upside is also greater than a bank account, and you're young.

thisaznboi88

iTrader: (7)

your never to young. My friend starts his when he was 18.

Dr. Colorado

I invested my paper route money into Ivy Growth MF when I was 13 y/o LOL. 20% return over several years so not bad. At your age, you should definitely consider investing in Roth. After tax dollars going in but no tax penalty coming out. Depending on the vehicle, you are supposed to keep the $$ in until retirement but are allowed withdrawals for things such as first home ownership etc. The reason Roth is good is because it has income ceilings in place so if you make over a certain amount of $$, you are not allowed to invest.

OTW, if you need the coin sooner just do dollar cost averaging (i.e. $150/month) into an ETF or indexed fund. Don't know if you want to be hedging on international or emerging market funds at your age

WillrunifChased

Learn to save while you are still young, if you can't save now how will you never be able to save once a house or a kid comes along. Try to learn how to invest yourself if you are good you can beat the market, if you do not get the hang of it invest in Indexes or Funds.

I started a Roth IRA when I was 19. Last year I had a return of 85%, I am up 20% so far this year I am hoping it isn't just dumb luck since the market has been good for a year now.

I wish my good friends would listen to my advice.

Dr. Colorado

Padawan

CLtotheTL32

iTrader: (3)

Wow I wasn't expecting this much feed back! I really appreciate all of the comments and suggestions.

Here's a short and simple explanation of my situation:

1-Started working at 15
2-Bought new car
3-Quit job in April 09
4-Parents took over car payments until I got a job

Now I'm starting a new job this weekend which I'm really excited about. The only thing I'm concerned about is having enough money a month to put into a fund since I will be reassuming all expenses pertaining to my car. Do I have to put the same amount of money each month into a fund or can it vary from month to month?

Here's how my monthly expenses look (roughly):

Car Payment: $260
Insurance: $25
Gas: $30 per week, or $120/month
Cell Phone Bill: $60

So around $460 a month for everything. Health insurance and all of that is taken care through my dad's job (SAS FTW btw). My parents pay all of my school expenses. I'm at a community college so tuition and books cost around $1500/semester.

I'm more than willing to take a portion of my earnings per month and put them in a fund but I don't want to drain the bank account and be strapped for cash by trying to save. Not sure if that makes any sense.

Please excuse the financial ignorance. I always thought I was good with money but I guess not

Renegade

Don't invest in a mutual fund, or any fund for that matter. Learn the markets and you will make way more than any mutual fund.

Renegade

Save up $2500 and then daytrade the e-mini S&P 500...if you want to make real money.

doopstr

There's an old saying "pay yourself first." Treat it like a bill.
Me: $150
Car Payment: $260
Insurance: $25
Gas: $30 per week, or $120/month
Cell Phone Bill: $60

BTW, too late for you but may help others.... I don't recommend full-time students carry a car payment. In college you should have something cheap and reliable that you paid cash for unless mommy/daddy is going to fully pay for your car.

thunder04

iTrader: (1)

You're never too young to save. The key is to not tie up all of your money just in case an emergency comes up.

I'm forced to put 7% of my income into a retirement account. However, the trade-off is that my employer matches dollar for dollar, which is VERY nice.

CLtotheTL32

iTrader: (3)

Thanks for the reply! It sounds like you know what you are talking about while I don't

As easy and nice as that sounds I think I would prefer to put my money away in safe keeping so I don't lose any over the long run. Granted I may make more money doing it your way but I'm not a risk taker.

I had never heard that saying and I like it!

I started making car payments when I was 16 so I'm used to it. When I went from 50 hours a week last year to 0, it was hard to keep up with payments. I've pretty much been living out of my savings account for the last year which is the reason why I've decided to pick up a job. Plus I hate relying on my parents. Some kids love getting money and cars from their parents but I don't like it. Once I get settled with this new job I'll be reassuming all expenses and also reimbursing my parents for everything over the past year. Those two reasons alone is why I'm worried about over doing it when it comes to trying to save.

If I could do it all over again I would get my mom's 1997 Dodge Intrepid that's fully paid for instead of getting my 01 CL-S or my 04 TL. Live and learn right?

Damn that's awesome how your employer does that. Thats got to be a huge motivation to save rather than spend.

I want to open two funds; one that I can have access to in 5-10 years and then another that I can access for retirement. Is that possible?



Btw my dad is taking me to his financial advisor/planner sometime next week. I'll see what he has to say.

WillrunifChased

What broker do you use and charting system do you use to trade the e-mini?

Renegade

I like Infinity Futures with ThinkorSwim Charts

hornyleprechaun

My current setup.

Checking
Savings
401K
Roth IRA
Investment Account

My 401K gets 6% + 3% Employer Match twice a month. I haven't contributed to my IRA this year yet, but plan on starting again soon. Remember there is a maximum you can do per year.

My Savings gets my direct deposits and hold a solid balance in case of emergencies. My Investment Account is where I transfer money monthly, and don't touch it. This is the emergency emergency account. This money is accessible when I want, but I haven't had to touch it in 2 years.

Remember you can always start out small, and if you get the option to have your employer match your 401K then contribute the max. Contributing to a 401K is the easiest thing to do since you never really "see" the money.

yunginTL

how is the daytrading working out for u?

Renegade

fantastic, have been a bear, and shorting emini's are very easy

gr8ness97

iTrader: (5)

Good Job starting early, OP. Since I'm single, I do the same on savings. I need to go to a CFP myself.

CLtotheTL32

iTrader: (3)

Unfortunately I haven't started yet. Well let me rephrase...I've been putting 25% of each paycheck and keeping it in my savings account. I haven't met with a financial advisor yet but I plan to.

Ken1997TL

+1

As long as you know what you're doing.

Caveat emptor

mitch14

yeah i'm somewhat where you are right now
working since i was 14, just got my first real job and need to start saving
the number one thing i hear from people/books is put your money into savings first, not spending it etc...
you may be able to set up a plan with your bank to transfer a certain amount every paycheck to a savings account, so you don't even see the money. Which is a good thing for most people, as if they don't see it, then they can't spend it, or be tempted to spend it. this is what you should be able to do with that 25% if you haven't already done so, it's just so you don't have to transfer it yourself and see all the money going in there
Right now i have money in mutual funds (medium to high risk)
and in stocks (two seperate companies- both high dividend yield (5 and 6%) with steady to moderate growth throughout the year)
all of my investments are doing good so far (only been about a month), but it's better when i see my money doing something, and not just sitting there gaining a few cents or dollars
i've invested the way i have because the percentages on savings accounts and other things like that is just kinda low for me, and why not take some risk while you're young, we have lots of time to gain money, or lose it and earn it back. just my thoughts
i'm saving 50% of my paychecks right now, and maybe put it into the mutual funds as well when have a few grand saved up in a couple months, but i'm always looking for something else to invest in
but day trading does intrigue me, too bad i work during the day

CLtotheTL32

iTrader: (3)

^Damn that's awesome! Starting early isn't a bad thing.

Unfortunately I have yet to speak to a financial advisor. I have been putting between 10%-50% of my paychecks in my savings account, depending on how much I make. I'm happy with the progress I've made financially within the last two months of being employed, but I feel like I'm still spending too much.

super4

learning about investing is just as important as investing itself. obviously the younger you start the better, but since u have the opportunity to start so young most professionals will tell you to be risky. the reason is you can afford to lose at this point, it doesnt mean that you will lose, but in a volitile market like these days u will likey gain the most by staying away from the "safe investments" such as mutual funds. equities are the way to go imo, but dont forget u have a long time to save so dont forget to enjoy your money while u dont have big responsibilities, good luck.

princelybug

iTrader: (16)

You're never too young to start.

But, as has already been mentioned, you have to be smart about investing, too.

dmikon

I would also ignore advice like the above. Trust me on this, there are very few people who make money by market timing. While I am sure the poster I quoted will tell you how he made X% last year and how he already made Y% this year, long term, he will almost certainly end up losing all he had gained, and then some.

Unless you live and breathe trading 24/7, have deep connections in the financial world, and have information others don't, stay with low-cost passive investments such as index funds. It's not going to impress your hot shot friends, and it sounds average and boring, but long term, you'll be the one smiling. If you're interested in actually building wealth (not picking stocks, or trading options/futures/Chinese IPOs, etc), I would recommend you start with a few books on the subject, and visit bogleheads.org.

CLtotheTL32

iTrader: (3)

Dang y'all really know what you are talking about! I'm looking up some of these financial terms as I'm reading the responses

I really do appreciate all of the advice given so far. Hopefully I'll meet with someone soon and see if I can put any of these ideas into action.

dmikon

Just a word of caution: make sure that if you meet with a financial adviser, he/she is a fee-only adviser. What does that mean? It means you're paying them for their time only, and that they do not work on commission. Most financial 'advisers' that work on commission, especially seeing that you do not have a lot of experience, will sell you expensive, actively managed funds.

I really would recommend that you read some good books such as Bogleheads Guide to Investing, and Bernstein's Investor's Manifesto. Also, you can start off with a Roth IRA and invest in low cost passive funds. No matter what anyone tells you, the only guaranteed effect you can have on your investments is controlling your expenses. If I were you, I would invest into a low-cost target retirement fund (places like Vanguard offer these for cheap) in a Roth IRA. A target retirement fund is the easiest way for you to have a diversified long term investment portfolio.

Renegade

I won't even get into this with you, but good luck with your 0% real earnings since inflation eats up your 3-4% savings accounts

dmikon

When did I ever mention savings accounts? Also, can you please tell me where I can get a 3-4% FDIC insured savings account these days?

If you've confused savings accounts with index funds (which is what I actually talked about), I think you could reasonably expect better than 0% inflation adjusted return. For example, if you invested money into an S&P 500 index fund on January 1st, 1979, and withdrew the money on December 31st 2009, you would have seen an inflation-adjusted compound annual growth rate of 7.43% minus the fund's expenses (which would be minimal). You would certainly see different return rates with other indices, but I used the S&P 500 as a popular example.

Hope this helps.

doopstr

If you invested in the S&P 500 in 2000 you probably aren't even back to even yet. Good forbid you picked up the QQQQ back then.
Everyone needs to figure out what their own skill level and risk tolerance is.

I have a mixture of real estate, index funds, stocks, and bonds.

WillrunifChased

What have you personally done with your investing?

dmikon

A diversified mixture of low-cost stock and bond index funds appropriate for my desired asset allocation. I own two actively managed funds but only because there are not enough index options in my 401k to get me my desired allocation.

dmikon

That's why you diversify and own the whole market. We don't know what the best performing market segment will be.

Risk tolerance - absolutely. Skill level - sorry but for 99% of the people the answer is none (I am in that 99% by the way), and for a few, some luck sprinkled in periodically. Most professionals who are paid to do this can't beat the market. Long term, the majority of actively managed funds, run by knowledgeable, highly paid managers, under-perform their respective indices. Quite a few just get liquidated altogether, creating survivor-ship bias. What makes you think you can do better, especially when it comes to hand picking stocks?

The best course of action for the vast majority of people is to figure out their risk tolerance and set up an appropriate asset allocation (fixed income/equity split). The next step would involve creating a diversified portfolio of low-cost (can't emphasize this enough) passive funds. Last but not least, ignore the noise on TV/media/newspapers/'experts', stay the course, and invest your whole life, adjusting your asset allocation as you age.

CLtotheTL32

iTrader: (3)