- April 25, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Considering Saving Money at a Young Age
At 16 years old, I have recently started my first job, working one day a week and earning $90 per shift. I am contemplating whether it would be beneficial to allocate some of my earnings into a savings account. While the amount may seem small and is quickly spent on my current interests, such as collectibles, the thought of setting aside even $18 appears insignificant. The financial advice received in my finance classes suggests saving at least 20% of my income, but I am hesitant to commit to saving more than that at this point.
Looking ahead, I have secured a job for the summer where I will be working four days a week, earning $360 weekly, and I do intend to save at least 20% of that income. However, for the time being, I am contemplating whether it is acceptable to indulge in my earnings without setting aside a portion for savings. With graduation approaching next year and the opportunity to work during the spring without any school commitments, I am considering spending the next two months enjoying my paycheck before prioritizing savings.
Despite my desire to enjoy my earnings now, my parents have advised me to consider saving for the future. While I do plan to save eventually, I am currently inclined to delay this decision.
Edit: It is important to note that my savings are not solely for collectibles but also for practical items like new PC parts or hobby supplies that I actively use.
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It’s NEVER a bad idea to save money, and it’s never a bad idea to start learning good habits like this!
Is the dollar value actually going to matter later? Nah. I’d try to maybe put $10 away just to get in the habit of living below your means. Truly a key life skill!
People really underestimate time and compound interest.
If you “only” save $18/week until you’re 65, and get an average of a 7% return over that time period, that $18/week grows into $395,400 by the time you’re 65.
That said, you’re 16. Feel free to enjoy this money and start really saving when you’re out of high school. The few years won’t make a difference so long as you keep this mindset up into adulthood.
Even at your age, money in savings is always a good thing. You never know when it will come in handy. Sooner than you think, you will be wanting to go to college or move away from home, or some other life goal, and savings will help you be secure when you do it.
I also want to echo what u/takabrash said – Being in a habit of saving money is a great mentality and habit to be in, and it will be easier the earlier you start.
If I were you, I’d figure out what you want your dollars to do for you. The idea of “savings” is too general to give you incentive to follow through. 20% is an arbitrary number, which you seem to realize. $18 is a weird amount. What will that do for you?
Do you use your money to buy food out? Do you purchase clothing? What sort of discretionary spending do you have besides collectibles? And do you have a long term goal? A trip one day? College? I’d figure out what you want your money to actually do for you and match it up with that.
I think you need to prioritize your spending. You might realize that setting aside $20 a month makes sense for a trip to Disneyland over the summer or you might realize that setting aside $20 a month is a great idea for adding to your collectible collection, while still having money for discretionary spending like food out with friends. Or you might realize you want to start putting $45 aside now to start off your car fund for the future.
Maybe a collectible is your priority after thinking about it. But I honestly think you can do better with your limited resources.
Hey OP, can you clarify if you’re planning to use the $18 “savings” to buy more collectibles or if you’re currently “saving” to buy collectibles and want to look into “actually saving”? There’s some confusion from other people.
Assuming you’re looking to make a change and save $18 a week in a savings account, I’d say that’s definitely a good idea. The sooner you get used to saving a chunk of your pay off the top, the easier it’ll be to keep up that habit. Seeing your account grow over time can be very rewarding!
If you’re just looking to buy more collectibles, then that’s fine too, you’re 16 after all, but developing solid financial habits early will pay off in a big way in the long run. For example, if someone saves/invests $1000 a year from age 20 to 30, then stops and lets it grow, they will end up with more money than someone who saves/invests a $1000 a year from age 30 until age 60. Compound interest is your friend!
Honestly not at 16. Was perpetually broke age 16-19 and had a blast.
Save your money in a regular savings account. Don’t worry about trying to build wealth at 16.
Get to a point where you have I around $1,000 for emergency fund and then enjoy your youth with the rest. You’ll never be 16 again.
Start saving money as soon as you can once you start your career. Making $5,000 a year isn’t really going to get any real savings going other than habits.
Yes the younger you are the more powerful each dollar is.
Put $100 a month into a Roth IRA (your parents will have to open it for you). If you do $100 a month starting now until you are 56 you will have $1,176,000 in tax free retirement income. You can start using the money at 59 1/2.
Just my 2 cents … Toss what you can into a Roth IRA account. It’s a very small and manageable amount to keep up and I wish I did this when I was your age.
20% is $18
Per month that is $72
If you put $72 per month into your Roth IRA starting now, in 46 years (when you are 62 and eligible for social security) you would have $847,000.
Now ideally you’ll contribute more eventually but this is just to show you the power or compounding interest and time which is on your side!
What is your family’s financial situation? You have lots of good advice on other things, but I’d want to cue your parents into an opportunity if they are financially in a position to do so.
Once you earn income, even at 16, you are eligible for a Roth IRA. Roth IRAs are great retirement vehicles, especially when there is a long time for growth. But, I agree with everyone that saving for retirement is not really something that is a #1 priority at 16. Don’t wait long, but I think you can wait until 22, or your first full time, year round job.
But, if you earn, for example $7,000 this year, you could put $7,000 in a Roth IRA. But it doesn’t actually have to be your money. If your parents want to “match” your income into the IRA, they can. Effectively, “you” put $7k in the IRA and they “give” you $7k. (or any lower number, $1,000, $3,500, whatever.) Obviously, they should only do this if their financial house is in good order, they have their own retirements sufficiently funded, etc.
If this happens though, and at 16 you have $3,500, and at 17 $5,000, It would be $139k at the age of 65 for you. If you keep contributing a little, say another $1000 a year from 18-25, and then never contribute again, it would be $241k at age 65. That could give you nearly $10k a year to live off in retirement. Some people retire with ONLY that much. So, if your family has money to save, this could be a real opportunity to give you a head start.
For me, I find money to be the best collectible. But I’m 30 years older than you and see retirement on the horizon.
Put $80 a month into a retirement calculator and see how much that is worth in 50 years.
I spent all the money I made when I was young and I’m really regretting it now with rent prices and no savings to fall back on. I say start now, put it in high yields savings and pretend it doesn’t exist (other than adding to it). Don’t be like me.
Start now and the habit will be ingrained faster.
Yes! While it’s not a ton of money, it’s a great habit and the money you save (and invest broadly in the market right now) is worth a lot more than money you invest later in your life simply because it has more time to grow.
That should leave 80% for fun and expenses that you can enjoy right away.
Even if it seems like an insignificant amount, it’s the *action of saving* that you should be doing. This will set you up to put saving a portion of your income as something you “just do”.
You saying you save up for PC parts is a good start
Honestly at your age instead of thinking of saving as a thing you should do just because I would think of it more in sinking funds. Figure out things you want to save for that you’d need in a year or more (a laptop for college, a car, a post grad trip to the beach, etc) and save for that specifically.
Basically, debt is expensive, and if you know you might need to get into it at some point you might as well save now to reduce the burden for Future You
Round it up – put away $20.
Talk to your parents about starting a Roth IRA (a retirement account) – put $10 in there a week – then you have $60 fun bucks a week.
Let’s do the math. You put $10 to start your Roth IRA and put $40 in a month. There’s 49 years until you turn 65. At a 7% rate of return, you have [$203,074.65](https://www.nerdwallet.com/calculator/investment-calculator) at “retirement age”. of course, you aren’t going to stay at the $40 a month contribution – but get the ball rolling now.
Yes, you should always put money in savings. If you start this now, it will be like clockwork when you get older. Open a hysa, transfer the money there automatically and then don’t look at it for a little bit.
It’s absolutely worth it.
It’s not about the amount of money right now but making the habit of saving the money.
You’ll have the account, you’ll have the transfers set up. It will just be the amount that increases over the year.
Please please please do this . When you are 60 you will be thanking 16 year old you.
Getting into the habit of saving now is a lifelong habit that will serve you very well.
You’ll discover that putting that money aside becomes painless (especially if you set it up to be pulled and go into savings automatically) and having an emergency fund and savings for a rainy day is well worth it.
Build the saving habit now.
I use to save 50 a month when I was your age I save close to 5000 a month now
[https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator](https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator)
Put in $0 for initial, $72 per month. 7% interest and 3% variance, and 44 years (when you are 60), and at a 7% rate it estimates you’ll have $229K. If you get a 10% average you’ll have $570K. Obviously as you get older you’ll get better paying jobs and be able to invest more and have more when you retire if you stick with it.
My post is just to show you the power of compound interest over a long period of time. Play with it and you’ll see how easy you could have millions, especially since you are starting so young – which is good… wish I did.
For what it is worth, I know plenty of people who are of retirement age and have less than that saved, or nothing at all.
The habit is more important than the money at this point in your life.
You are learning to live behind your earnings instead of spending everything or living in front of them (loans w interest).
This is the best time to put some away. 20% tucked into a Roth IRA account…your future self will totally love you for doing that!
Mathematically no, but starting this habit now will be huge for you in the future.
Saving for the long term vs a short term goal are different skills. As long as you’re aware of this, that’s important.
I get you’re only getting $90 and 20% of that is a huge chunk. But I would encourage you to put something away for long term just to build that skill. And keep in mind 20% of any check, as you go forward, is a huge chunk of what you will receive. This just seems more disproportionate due to the dollar amounts involved right now.
20% would work out to about $80 a month. Let’s round it up to $100. Don’t think of it as just $100 though.
Properly invested at your age that money will grow 100x by the time you’re ready to retire. It’s actually $10,000. And I think you’ll agree that ten grand is a lot of money.
You’ve just gotta get it invested. The first order of business is to save up $1000. From there you’re going to search out “how to open a brokerage” – Vanguard and Fidelity are both good choices.
If you build a habit of saving and investing 20% from 16 years old you’ll be a millionaire before 50 – easily.
If you can afford to it is worth it. But you have to be careful with choosing bank accounts because some have requirements that need to be filled to avoid fee.
If you keep your plan to save in summer, it isn’t wrong to spend either, but making it a habit to save is better.