#SavingsJourney #InvestingAt18 #RothIRA #FinancialLiteracy
Hey there! 😊 I see you’re 18 and sitting on about $5k in savings, which is awesome! But I totally get it—just having that money in a bank account isn’t the best move since it tends to lose value over time. So, you’re wondering: “What should I do with my savings?” Let’s unpack this a bit!
First off, it’s completely normal not to know where to start when it comes to investing at your age. Many people face similar questions:
- Understanding Investment Options: There are several choices out there, like stocks, bonds, mutual funds, or even real estate. It can be daunting!
- Roth IRA Consideration: Opening a Roth IRA is a solid idea since it allows your money to grow tax-free. But figuring out the initial steps can be confusing.
- Budgeting and Financial Planning: With bills like car insurance and a phone to pay, planning can feel overwhelming.
Here are some suggestions to get you started:
- Do Your Research: Look into different investment options. Websites like Investopedia can be super helpful.
- Consider the Roth IRA: If you decide to go with this option, check with a financial institution or online broker that offers user-friendly platforms for beginners.
- Build a Budget: Keep track of your income from your part-time job and set aside what you can for savings and investments.
💡 Remember, investing is a long-term play. Starting early can benefit you significantly. Plus, every bit you learn now will set you up for financial success in the future!
So what do you think? Have you started looking into any investment options yet? Or do you have tips to share from your own experiences? Let’s keep this conversation going—your insights might help others who are feeling just as lost!
Highly recommend to move the $5k into an index fund. Or at least put it in a high yield savings account. I don’t think you need to put this in a Roth IRA account, you’ll see it grow if you move it to an index fund
You’re young and wise already, congrats! I’d personally suggest going to the BogleHeads sub, and studying. $5K is relatively low, but it’s a great start still. I think most people would recommend : open and max a Roth IRA, get rid of any debts you have, and put the remaining into a low-risk ETF like Vanguard.
Besides, I think you could also invest in yourself. Can these $5K offer you a degree or a skill that will make your worth on the job market increase? Then you should certainly go for it. $5K as a down investment for your career will feel very low when you make $60K / $100K / + every year.
Hope it helps.
For serious advice you need to add a little more about your life situation. For starters, the tax jurisdiction (US? By $ you mean US-$?). Do you pay your own bills, any predictable expenses coming up in 1 year, 5 years, 10 years? Do you have a job or are you in education, is that going to change in the near future?
Very generally:
– for the part of the money that you may need in the near future (unexpected repairs, possible lost of job with gap between expenses and expected unemployment benefits, etc.): Instant access savings account with deposit insurance and competitive interest rates. What’s competitive depends on your home currency.
– For the part of the money that you know you won’t need in the next couple of months but may need in 1,2 or 3 years: Fixed deposit for the respective period, with deposit insurance and competitive interest rates. Protects you from near future interest rate cuts.
– For the remainder of the money that you know you won’t need for 10+ years: low fee ETF tracking a globally diversified stock index, like FTSE All-World, take the accumulating version for tax reasons, never sell based on its movements, only if you absolutely have to because of a financial emergency or if you reached retirement.
Nope. Do not mess with your savings. Savings is for savings.
Now that you have a nice emergency fund do not touch it.
What you can do is stop contributing to it and start contributing towards something like a Roth IRA if you haven’t already.
If you need to withdraw something like 500 or 1,000 to open the Roth IRA that’s fine.
Do not feel pressured to invest your savings.
Because savings and investments are two different things.
They are different layers of like a financial onion. Savings is money that you could have an immediate need for.
Investments typically have a 5+ year horizon. Meaning you intend to not touch that money for over 5 years.
First advice – Do not invest your entire amount as you are new in this sector so you have to take step carefully.
You can pick 1-2k from your savings and then start investing on side hustle. There are lots of ways to invest such amount to start a side hustle. From the beginning of my journey i also started with a very low amount and now it’s paying me $1k per month. Try to start something where you can find yourself fit.
Never ever go for trading or gambling type investment. It will ruin your investment. Be careful about those suggestions where they ask you to start gambling or trading.
I’d plop it in a high yield saving account right now to get at least get 4.5-5%. And open a Robinhood account or something (everyone here hates on Robinhood but I think it has the best interface and is the most beginner friendly). Wait until you hear some news about the market tanking, then start slowly buying ETF’s like SPYG, SPYD, VOO (one of those) and maybe an international ETF. $200 or $500 at a time.. limit orders. That way you have a good chance of doubling your money quickly, which makes all the differences. Stocks are mostly at highs right now and its an election year, which can mean trouble. Be patient and keep watch until next March and see whats what.
HYSA is the way to go for many at this time. Interest rates between 4-5% and it’s money that’s easily reachable to withdraw if needed. It’s a start and an easy way to grow your money. American Express HYSA is what I use.
Also, out of context but I figured I’d mention this. When I turned 18 I went to my bank to ask for a secured credit card which was a limit of $200. I used it for the first year to pay for gas and paid off weekly to build a good credit history. I’m 29 and it’s created a credit age for me and led to being able to open credit cards wisely. Hope this help! Best of luck
You need to study about budgeting, how to approach allocation of money. You asking this question already puts you ahead of most people. However, the battle that most people fight is defining what does it mean to be wealthy. Some people use debt, some pay for everything in cash, some go into real-estate and so on. Sitting down and understanding your financial obligations and how you want to spend your life can reveal a financial path that motivates you. My only piece of advice is to stay away from anything that sounds too good or a get rich quick mentality. Your $5000 can sit comfortably in savings while you figure out a way forward that you are comfortable in doing. Good luck!
Work towards saving six months worth of your income and put it in an insured savings account at a bank or credit union. Do not put money into the market or uninsured investments until you have this rainy day fund. Within the financial institution, they should offer a high-yield savings, a money market or CDs that will earn you more while keeping your funds safe. Research CD laddering where are you put your money in CDs of various lengths so that you always have something maturing in case you need it.