For context, I just turned 18, have a part-time job and $2000 in savings, and I am going to college on a full-ride scholarship. I want to know where I should put my money to slowly grow my money over time and make an emergency fund. I live pretty frugally and plan on continuing to do so, but I also don't really know how all of this works.
I've heard buzz words like 401k, retirement funds, investing, and a high-yield savings account, but to be honest it all sounds like gibberish. Just looking for some advice on where to start and how to get some passive income going if we are being ambitious.
Just Turned 18, What should I do financially?
byu/Any-Conversation8297 inpersonalfinance
Posted by Any-Conversation8297
9 Comments
First try googling those words. $2k is basically just spending money. You can open a HYSA and put some savings there would be a good place to start an emergency fund.
Well I’d pay off any credit card debt and then save the rest depending on what you want to do in the future.
Those “buzz words” are not buzzwords.
Welcome and congrats on getting started early! The wiki has lots of good information to get you going, especially the flowchart
$2000 is a solid start – I’d stash some for emergencies and mess around with investing a little each month, even $50, just to get the hang of it.
ETFs will be your best friend. Its a “set it and forget it” type of thing. Theres so many “broad market” ETFs. They are essentially the same-just through different brokerages. One of the biggest, which I use, is VOO. It tracks the top 500 US companies. Through Vanguard for example, with ETFs you dont even need to worry about share price. Just contribute through fractional shares; one share is $600 and you have $100? Doesnt matter, still can buy into it. Its about growth per year (amongst other factors but VOO is great for someone with no knowledge). $100 per month in VOO over 40 years should easily be over half a million. Open up a Roth IRA and its all tax free growth and free withdraws (after 59.5). HAVE A PLAN AND KEEP IT SIMPLE. Time in the market is more important than timing the market.
Turn a healthy ETF in a savings account. Easy in easy out
If things sound like ‘gibberish’ then that means you need to do your research and learn. Welcome to adulthood!
Start with a savings account, HYSA. That will earn you more interest. 3-6months worth of expenses, this is your emergency fund. You can also save here for fun things you want.
401k is a workplace retirement plan, when you get a job, you can see if you have access to one.
For now, if you have income, you can open a Roth IRA. which is another type of retirement account. You can contribute $7500/year or your income, whichever is smaller.
Retirement accounts are to save on taxes, and let your money grow till you need it when you’re older.
In 401ks and IRAs, you invest, as opposed to save. This is where stocks come into play. But its better to get index fund ETFs, which trade like a stock, but actually cover large amounts of things. VTI, for instance, its the Total US Stock Market index fund. It tracks the entire US stock market in 1 fund. So you don’t have to pick individual stocks (like Apple, Nvidia, etc). You put money in, and forget about it for decades. And you’ll end up with a LOT of money later in life.
401K isn’t a buzzword, my friend. It is a retirement account provided by your employer. Get a high yield savings account, put 15% of your earned wages into the 401k or open a Roth IRA with Fidelity, Schwab or Vanguard, invest in an ETF like VT or VOO. Repeat. Don’t buy stupid stuff like a new car.
Now’s the time to invest in yourself. Knowledge skills and experience.