KevinJ
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| Savings Plan |
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Hello, my name is Kevin and I'm 18 years old. I will be graduating high school this June. I'm attending community college for two years and will be transferring to a four year institution afterwards. My parents will be financing a majority of my college education. They also pay for my car insurance, and cell phone bill. Of course I am grateful for their generosity. Obviously this won't last forever and I plan on paying them back for my college education.
Currently I work seasonally (summers and winters) at a waterpark/ski resort. I put most of my money into a savings account, but have made some significant purchases which has lowered the amount of money I have saved up (car purchase, car repairs, senior prom, etc.). I currently have approximately $1000 in the account ($500 minimum required).
I've always been frugal with my money and rarely spend it on goodies. But as I become an adult, I know it will be extremely important to be responsible financially. My question is, how should I get started on a path towards financial security? How many accounts should I open up (savings account, emergency account, retirement account, etc.)? Should I use more than one bank? What about a checking account? My issue is that I only have one savings account right now, and I tend to pull money out of it for various reasons (as I stated earlier). What about bonds?
Any advice will be greatly appreciated!
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Mon May 18, 2009 12:04 am |
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oldguy
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You are definitely on the right track - your questions demonstrate great awareness.
College - 2 yrs of comm college and 2 yrs in a 4 yr college is an optimal plan, the most bang for the buck. Make sure that you are in a marketable field - a common problem these days is too many majors and many are not viable. If you stick with the applied skills degrees - accounting, engineeing, nursing, teaching - you can hit the ground running and have a good job anywhere, anytime for life. But the liberal, music, social, art, etc, 'soft' degrees are not so saleable.
Accounts - one checking account, one savngs account, at one bank. And wealth building accounts - 401k, Roth, taxable - at a no-load company such as Vanguard or Fidelity. A small amount of money in a bond fund is OK, but only 10% during your working life, keep about 90% in stock index funds. As you near retirement, shift from 90%/10% to about 20%/80%.
While you are working, you are in your wealth building years, you need the power of compounding at about 10% to 12%/yr to grow wealth abnd outrun inflation. When you approach retirement age, you shift from wealth building to wealth preservation, you have lots of money so you use safe products that pay only 4% to protect that money from a market crash.
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Mon May 18, 2009 3:22 am |
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coaster
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Getting an early start is THE single biggest and best step anyone could take.
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Mon May 18, 2009 6:29 am |
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littleroc02us
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Starting early is the key. Here are my suggestions:
1. Open up a Money Market account from a company such as ING that gives you around 1.6% interest on your money with unlimited check writing capabilities and a certain number of withdrawls a month.
2. Build up an emergency fund of $1000 for the time being. That amount will grow later.
3. Pay off all your bills.
4. Invest in Roth IRA's. Here is an example of what you can do if you start at 18. If you were to put $5000 into a Roth IRA that averages 8% for 40 years you would have 1.5 million dollars tax free upon withdrawl. Sounds to good to be true. Lets say you get 10% on that money you would have 2.6 million. And your only 58.
5. Go for it.
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Mon May 18, 2009 2:13 pm |
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KevinJ
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quote:
Originally posted by oldguy
College - 2 yrs of comm college and 2 yrs in a 4 yr college is an optimal plan, the most bang for the buck. Make sure that you are in a marketable field - a common problem these days is too many majors and many are not viable. If you stick with the applied skills degrees - accounting, engineeing, nursing, teaching - you can hit the ground running and have a good job anywhere, anytime for life. But the liberal, music, social, art, etc, 'soft' degrees are not so saleable.
I plan on going into teaching, so hopefully I'll be able to find something.
quote:
Originally posted by oldguy
Accounts - one checking account, one savngs account, at one bank.
How much money should I put into a checking account?
quote:
Originally posted by littleroc02us
2. Build up an emergency fund of $1000 for the time being. That amount will grow later.
Should this be put into a separate savings account?
Anyways, thanks for the advice all!
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Mon May 18, 2009 7:24 pm |
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littleroc02us
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Absolutely, so that you don't touch it unless you have an emergency. (car broken down, medical problem, etc.....) Your not trying to make large amounts of interest off of it, your only keeping the money liquid.
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Mon May 18, 2009 7:39 pm |
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oldguy
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quote:
I plan on going into teaching, so hopefully I'll be able to find something.
Good. Right now our K-12 schools are in 28th place among the 28 Industrialized Nations - and that is hurting the US ability to compete in the World market.
Our main deficiency is in math and science - our schools minimized that curriculum about 20 years ago, educators declared that math & science was not needed in everyday life and, besides, it was hard to teach. Since then the error of their ways has become very obvious. So now there is a serious shortage of math and physics instructors.
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Mon May 18, 2009 7:42 pm |
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KevinJ
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quote:
Originally posted by littleroc02us
Absolutely, so that you don't touch it unless you have an emergency. (car broken down, medical problem, etc.....) Your not trying to make large amounts of interest off of it, your only keeping the money liquid.
Sounds good. I just want to make sure I don't feel the need to open up a hundred accounts for different things.
Now, this question may sound silly, but I'm not sure how to go about it. If I want to save up money for a trip, concert tickets, or anything that will be relatively expensive, should I put the money aside in cash, a checking account, or a savings account? Or is there a better way?
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Mon May 25, 2009 3:36 pm |
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littleroc02us
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I don't know about other people, but what I do is if I'm saving for something to pay for in cash that is expensive I have a savings account for that. Right now I have
1. Emergency Money Market fund
2. Savings account for expensive purchases
3. Everyday expense checking account
4. Mortgage, taxes checking account
This helps me to organize my money and transfer and to autopay. Put your money into a savings account.
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Tue May 26, 2009 5:18 pm |
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KevinJ
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quote:
Originally posted by littleroc02us
3. Everyday expense checking account
Does this include your monthly bills (other than your mortgage and taxes)?
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Wed May 27, 2009 12:58 am |
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billrainier
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Getting an early start is the biggest and best step anyone could take. 
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Wed May 27, 2009 2:52 am |
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littleroc02us
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quote:
Originally posted by KevinJ
quote:
Originally posted by littleroc02us
3. Everyday expense checking account
Does this include your monthly bills (other than your mortgage and taxes)?
Yes it does. But I have my Vanguard Roth IRA automatically withdrawl for both my wife and I.
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Wed May 27, 2009 7:48 pm |
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Cherryl Hanson-Simpson
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| Re: Savings Plan |
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I’m very impressed with your determination to begin your adult life with the right savings attitude. There are three elements to saving success 1. Paying Yourself First 2. Follow the 10% rule 3. Make it Automatic.
Now that you’re committed to making your savings your first expense, the next step is deciding how much to put aside. Financial advisors always recommend that you try to save at least 10% of your salary. Save a larger portion if you can. Using an exact percentage gives a ready-made figure to save, and ensures that you will increase your savings as your income grows.
The keys to personal success in saving are simple: decide that building your wealth is important to you; determine the amount you should be saving regularly; and be disciplined in making regular investments.
http://blog.financiallysmartonline.com
www.financiallysmartonline.com
http://fsadvice.com
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Thu May 28, 2009 3:40 pm |
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oswaloman
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Its very true that in this fast moving life we have lit bit of time for ourselves. We never sure what will happen on the very next moment. So its good to have saving plan for emergency. At some point time we can depend on other. Only the person have to fight himself for very thing.
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Mon Jun 15, 2009 6:54 am |
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KevinJ
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quote:
Originally posted by oswaloman
Its very true that in this fast moving life we have lit bit of time for ourselves. We never sure what will happen on the very next moment. So its good to have saving plan for emergency. At some point time we can depend on other. Only the person have to fight himself for very thing.
This is very true. I've found that I needed to dip into my savings account for a couple of car repairs. In fact, my car's brakes are being fixed as I post this!
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Wed Jun 17, 2009 8:19 pm |
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