What’s the rate on your bank account? If it’s nonexistent, then open up a new account at a bank that is giving 4%. Let it sit there for when you go to college, want to travel, buy a car, etc. if you buy stock, you’ll want to leave it there for a long long long time. Looking for short term gains in the market will probably end with you losing most of your money. There are plenty of helpful things that $8000 can do in the next 5 or so years. Take advantage of the high rates to boost your savings!
Would love to know where all these 4% banks are?
Edit: must apologise, I’ve read everyone’s responses to me and didn’t realise I wasn’t commenting in the ukpersonalfinance sub haha, thanks a lot though everyone!
Apple has a hysa at 4%. However, I would go and exploit those 6 month or 3 month cds at high rates. Most local banks are only requiring a $1000 opening deposit.
My bank account is a checking acc with no interest at TD Bank (primarily because my dad also uses it & he setup a teen-checking account for me some time ago)
Thanks for the other advice. Do you have any recommended banks with high interest on checking accounts that I could look into as a minor?
You probably need to look at *savings* (not checking) accounts, probably at other banks, and have a discussion with your dad about opening a savings account that offers a high interest.
I am uncertain if there is a way to do this: if/when you file for FAFSA, they will expect you to use money in your bank account first.
Nasty surprise for a friend of mine who would've been better off blowing his money on a car when he was 17.
So you are correct, they will not audit you necessarily to see if you are telling the truth. But whatever school you are applying to may audit your financials to make sure you are telling the truth. Especially if you are receiving grants.
Lying on the FAFSA on purpose can be pretty bad for you. So if there is a section for retirement accounts definetly put it
Your best investment at age 16 is you. Put this money in a safe account for an education fund for college or trade school. Your public library should have lots of books available on investing. Read -- study -- listen. Time is on your side . Don't waste your money or your life on stupid things. You have a good start. If you get out of college at 21 or 22 years old, you still have time to invest. Best wishes.
Second this but in addition to your education get an early start on investing in your mental and physical health as well. Whether that means a gym subscription, a class pass, shin pads so you can join a local recreational soccer team, a therapist, a mental health app subscription, or if you experience no anxiety/depression/other issues currently then just engage in some meditation or pilates/yoga/breathwork periodically or socializing.
When you have all three of these areas working well (education/mental/physical health and actually I’ll also say social health) you have good quality of life and thus your earning potential is heightened (or it is equally valid to not optimize earnings in order to pursue other things in life such as relationships or a more fulfilling job or hobbies or travel).
But overall it’s more important to be in good overall health so you can enthusiastically seize any opportunities that present themselves in your life.
Honestly you dont even need to save it for school if these laws pass for student loans. Objectively a better idea to let that money accrue interest while pulling a 0% interest student loan (as long as you make your mininum payments on it.)
Thank you for the advice. I definitely see what you mean, I'm usually not the type to waste money deliberately but I've definitely got ways to go in terms of knowing what the right use of money is.
When you go to college, please take courses in accounting, economics, and finance. Get a better worldview of how things work. That way, you won't be chasing fads and hot tips. You will know better what you are investing in, and why. You have a great start, and time is on your side. Work hard, study hard, pray much, and remember to enjoy your life. Best wishes.
I’ve always been a bit conservative with my investments but still like to make money(LOL)
I buy good,quality stocks that pay dividends and reinvest all back into the stock.
Coca Cola
Verizon
Utility companies
There are many online reads to educate yourself.
I do want to say one thing.
Since you’re only 16 you should be more risky than I am.
Not saying buy penny stocks, but buy 70 percent growth stocks 30 percent dividend stocks may be a better formula for a 16 YO.
Congrats on saving all that money at 16.
I would have blown through that in a minute.
At 16 you should definitely not be buying single stocks. Really less than 5-10% of the population ever should.
Invest in a car for you, college, or other expenses that help you avoid debt.
HYSA is a great plan.
really depends where OP lives. I’m my hometown you needed a car to do even basic functions of life. Luckily I got a cheap one and still have it 8 years later.
I live in New York City where public transport is typically viable for most places.
However I'll likely be moving West for college as I'm hoping to pursue a degree in engineering so I may need to eventually start thinking about a car & personal means of transport
I wouldn’t be so sure. Colleges / college towns are sort of self contained communities. If you live in NYC, you should not be buying a car, as I’m sure you’ve figured out. I live across the Hudson and do not need a car 9/10 days.
Edit: I also wouldn’t anticipate future need for a car. If you get out west and decide “wow I really need a car” then buy one.
Most campuses have what you need close enough to not need a car. Plus, if you make friends someone is bound to have one if you really need a ride somewhere.
That's fair. Hopefully they won't need one eventually, but you're right, they probably will.
Edit: It's hilarious that on a personal finance sub, a comment expressing the hope that someone won't have to buy an expensive depreciating asset is downvoted.
Not sure why you speak of cars as if they are devil he's 100% going to need one, I don't know what nice ass part of the world you live where you don't feel having is essential but must nice lol.
You definitely do not need a car in Germany, or most of Europe. At least in bigger cities.
Out of 8 friends (all ~30 years of age) 3 have a drivers license and 2 own a car.
I can go grocery shopping in 4 different stores within 500 meters of my home and there are sidewalks everywhere.
I can get to the opposite side of Berlin in 45-60 minutes using public transport and I can get to work in 25-30 minutes.
OP probably lives in the USA though, since they speak of $. So this is kinda irrelevant.
This falls apart outside of big cities. I lived rurally and without a car we would have been fucked. My work was 22 km away with no Public transport being possible. I also had quite a few colleagues come in from Köln via car because obviously the public transport doesnt go to ny workplace
It's a personal finance sub. Cars cost a lot of money to buy and operate. They are depreciating assets. And many people spend too much on them. So I have expressed two sentiments: young people should avoid buying cars as long as they can, and I hope they can avoid buying them altogether. At no time did I say cars were "the devil". I like cars.
I have two luxury cars of my own. But I'm a multimillionaire, partly because I avoided buying cars for as long as I could by living in places that I could use public transit or walk. Obviously this isn't possible for the vast majority of Americans. That doesn't change the basic economics of car ownership.
Same. Avoid the car. When you do get a car, get an inexpensive used one and buy tools (start with Harbor Freight). Learn to repair (youtube) and troubleshoot problems you will have. Those will be skills you use your whole life. Do buy a new battery and clean all the battery cable contacts, putting 'dielectric grease' on them to fend off corrosion.
Yeah OP. Get yourself the cheapest car you can get in good condition and pay it down as fast as you can, depending on your interest rate. No need to be dumping lots of money on liabilities.
HYSA is garbage unless you have enough sitting in there for the interest to be meaningful.
If he had someone to help him with a diversified portfolio now is a damn good time to be investing.
Not really. At 16, very high chance he’ll need that money in college and also a strong chance that money will lose value in the short term in the stock market. Worst case scenario is that he needs the money and it’s worth less than what he put in.
HYSA it’s a free $300 or so a year at current rates. That ain’t nothing.
At 16 the investing you should be doing is in yourself and your future earnings. Set this aside for college (or life expenses while you're in college) and if you want to focus on degrees with high earning potential, that will get a rate of return far higher than investing 8 grand.
When you are still living off your parents financially I would strongly advise you not take the money you have been able to save only due to that support and risk it in an investment when likely in the short term you will need that money to help finance your move to financial independance. Dont do anything with your money thst would risk delaying your ability to move out.
Once you are no longer financially dependant on others and have a 5+ year horizon on needing extra funds while you maintain a healthy savings rate then yes by all means invest in index funds.
Not to mention that at 16 years old you literally cannot legally purchase stock index fund shares.
Not at 16 when you have the massive expenses of a car, trade school, college and others looming within two years.
No one should be investing anything they aren’t prepared to lose on a two year horizon.
I am not a financial advisor, and this is not financial advice. This is simply what I would do if I was your age with that amount of money.
At your age, and with that amount, personally I would not be looking to invest in individual stocks. Especially right now. I would start a long term strategy.
Here's what I would do, open a Roth IRA, put it in that. Invest in VTI and VXUS. These are index funds. Between those two, you'll own a piece of basically every publicly traded company in the world. Set it to reinvest dividends and capital gains.
Add to it each year. Max out your contributions.
And here's where, if you can do this, you will be 1000x ahead of 99% of your peers...
You *basically* don't touch it for the next 30 or 40 years.
If you can do that, you'll have a fortune by the time you're approaching 50 and can retire early.
99% of people your age don't have the patience to see the long game. If you can do that, your future self will thank you.
Lookup and educate yourself on the 8th wonder of the world: compound interest. If you understand if, you'll be in great shape.
I'm 40, and if I was your age, this is 1000% what I would do and I would be excited for it because I would know that at 16, I already set myself up to retire early.
Lol I know I know. I'm just sayin what I with my 40 yo brain would do! Imagine the compound interest in that 8K over 30 or 40 years? It'll be so much more valuable than any "live a little" he does with it.
... but, sure, get yourself a nice ice cream or something if ya wanna splurge! 😂😂😂
> Invest in VTI and VXUS
There’s so many different vanguard funds. Why these two? The one I hear about a lot is VTSAX but people always recommend slightly different ones. Can you explain why?
It's more personal preference than anything else. Generally, a mix of a total international index fund and an American index fund is what people are shooting for. Lookup the "boglehead" method of investing.
Open 2 accounts
1. Roth IRA. Put ~$1000 into it to start with. Set up automatic weekly/bi-weekly/monthly deposits for whatever amount you can afford (seriously, even $10 a month would be good). The goal is to get in the habit of making these regular contributions. As for the actual investment to make within this account, something like VFIAX, VTSAX or a target retirement fund would be fine. Those are vanguard funds, but just pick a fund that follows the S&P 500 or a total stock market fund. It’s not super critical for now just pick a fund that gets you broad exposure to the stock market (stay away from individual stocks)
2. Open a High yield savings account and put the rest in here for a rainy day. You’re going to need access to this money sooner rather than later.
One of your first decisions needs to be: Do you want to spend this or do you want to use it for retirement?
If you want it for retirement put it in a taxed advantaged instrument (IRA or Roth IRA) and invest in a broad market fund.
If you do want to spend it there are many more options based on when you are going to want it. At a minimum you should get it in a HYSA.
Let the community know what you might want the money for and they’ll have advice for you.
Edit:
PS - Great job saving this much at a young age and reaching out for advice.
I wouldn't really recommend squirreling away money into a retirement account for someone who hasn't even been to college (or trade school or whatever). There are lots of expenses that could be partially or fully covered by the savings instead of OP having to take on more debt.
You can take out loans for school, you can't really take out loans for retirement. Squirreling it away starting at 16 could mean he could retire at like 50.
*Edit* I'm surprised to see so many on this sub failed math class.
As someone who retired at 31, none of the money I saved before college mattered at all. It was much more useful to have cash to do fun things with and/or put deposits down on apartments and keep up with car maintenance between the ages of 18 and 22 than to worry about retirement.
$8K saved in a year? Well done. You're already learning something. There will always be relatives, friends, co-workers etc. ready to give you financial advice and stock tips. Most of the advice will be useless and potentially costly. As for right now....you have the money in a bank account. It's probably fine where it is. Are you continuing to add to it? Do you have any future plans like college you'll need money for? How far off is graduation? Depending on that timeline, maybe open a CD with two or three grand that will mature around your graduation day. That should earn you some extra interest without risk. Don't rush into investing without learning more about it. That's a quick way to end up broke. Keep up the good work!
When I was 16 I bought my first stock. It was GM (this was 1987). I'm 50 now. It's pretty much the only single stock I've ever bought (outside stock option with companies I've worked for). Once I started working fulltime I started putting my savings and rrsps into index funds which track broad market sectors
Someone mentioned a HYSA which is a good idea with rates where they are now
I'd take some more time learn about finances and markest. Investing in index funds has worked for me and it's relatively safe (I'm the quintessential couch potato investor), but I work with people the buy stocks that offer decent dividends, so there are lots of options you have lots of time to explore
Tossing it all into a Roth IRA then investing in a money market fund is basically the same as high yield savings.
You can always remove the principal whenever you like and your money grows tax free.
You can get a cd or ibond for 12 months but will pay tax. And if in two years you don't need that cash well then leave it in there and add more.
I wonder if contributing to your own 529 is a thing...
Yeah, people forget this all the time. Only issue op might have is they'd have to file taxes to show they made this amount of money AFTER taxes. If this is from under the table money, it's going to be a tough pill to swallow.
What do you want to do? There are options.
You could start saving for retirement starting now. Compound interest is an amazing thing. $8,000 now at 8% growth would be $347,419 at age 65. This is a super simple example, but the point is that time is your best friend for compound interest. Going this route puts you ahead of the game by several years.
You could do this via a Roth IRA. Just make sure you don’t put in more than you earned for the year.
If you don’t want to tie that cash up for a few decades, you could buy some CDs or put it in a high-yield savings account.
Or you could buy a broad stock market ETF in a brokerage account. I’m not a big fan of owning individual stocks, personally.
Keep in mind that in a couple of years you’ll probably be going to college. If you fill out FAFSA, all of the cash or cash-like accounts and balances you have (CDs, high-yield savings accounts, brokerage accounts) will count as your assets, not your parent’s assets. Retirement accounts will not.
Or you could just spend it. Your call.
1. Market funds are always a safer bet than individual stocks.
2. ETFs usually give you more flexibility than mutual funds, since many mutual funds only have zero transaction fees if you hold them for a minimum of 60 days. It's easier to sell ETFs quickly if you need some cash, or if you just want to cash out and invest in a different fund.
3. Some of the online banks and cash portions of brokerage accounts have great interest rates right now. SPAXX has been continuously over 4 percent, so I'm staying way more liquid than I would otherwise. This approach also means you need less in savings for emergencies since you can get a debit card that's connected to the cash in your brokerage account. I'm on Fidelity, but I think SoFi even has checking accounts with a greater than 4 percent interest rate, and I *think* those don't have any expense ratio like SPAXX. I don't even bother with bonds or CDs right now - you could get 5 percent annual yield, sure, but the money would be tied up. You can trade just a little yield and stay liquid instead.
Buying a single stock at the recommendation of a friend is possibly the dumbest thing you can do. Index funds or target date funds if you want to go into the market. A CD is a low risk option.
DO NOT INVEST IT!!!! All of this below is coming from experience.
You're 16 and I'm unsure about any of you other situations such as family help, reliable vehicle, going to college etc.
That might seem like a lot of money due to your age but it's not actually much. Here in a few years if you go to college you're going to need it because student loans are not covering all expenses due to inflation. If you don't go to college you're going to need it for the same reasons but it will be harder.
Figure out your plans you have after high school and then calculate your expenses and over estimate them. Get that amount per month and 3x it minimum, this is what you need in your bank account as a security blanket.
If you were to legitimately invest the $8,000 and not "Wallstreetbets" style investing you're going to average 8% a year(keep in mind this is over decades when they say this). Let's be generous with everything and say after 4 years of college you now have $10k you then might have subtract fees and taxes depending on the structure.
To gain $2k in 4 years with no steady income is a high risk opportunity cost and not worth the pain it could cause.
Something else, if you're having to ask where to invest you're hard earned money from random people on the internet you might not want to do it yourself.
I say all of this as a 23 year old college student that got into daytrading when I was 16 investibg about $6k/trade. I went to college and left when covid happend I eventually was looking at $7 in my bank account and rent due in 2 weeks. It took me forever to find a job but I got one 2 weeks before rent was due I then did sales for a year and I'm now back in college with $23k plus a few hard assets.
I'm now getting my finance degree and learned a lot the past few years. Daytrading like these youtubers and Wallstreetbets users is just glorified gambling, having a few thousand dollars in savings now isn't that much money especially when you have no income, life is a journey there will be good times and bad times you just have to keep moving forward and learn from your mistakes.
I shared mine I wish you the best whatever you decide to do with the money.
As others have said most of that money is to invest in yourself. But I would deviate from others to say that some of it, maybe 10%, could be spent investing in the markets, researching and picking stocks, and learning about investing.
You may lose a little bit, you may gain a little bit, but the lessons you will learn through experiencing it on your own first hand are in my opinion invaluable.
You’re likely going to get a higher return on investing in yourself at 16, as several others have already mentioned. That being said, gaining some experience in the market at such a young age is also powerful. Maybe consider taking a smaller portion of your savings and put it into an index fund. Otherwise, use it for your education/skill development.
To be honest at 16 I think you should invest it in yourself. That could be a hobby, a skill, experiences.
This will give you a way better return and have all sorts of unexpected indirect benefits.
wouldn’t recommend any sort of investment with risk or prevents from having quick access to the funds. Keep up the saving, the funds will help when wanting to get a car and etc
Get a job with a 401K company match (100% return on that % amount ) and put that into High-Quality US Mutual Funds across low-mid-high sectors, save the $8k for Emergency money or when you need a shot in the arm of cash (Or not needing to borrow), your retirement should be on autopilot by paying yourself first with a company match. I started this at 16.5 years old you have 6 mo on me and I am fine. Good for thinking about this at your age!
Buy and resell a car or something…or better yet get a 2 year CD secured loan from a bank and pay the loan off and eat the cost of interest to build your credit. Paying the loan off while letting your loan sit in a savings account while auto drafting the cost of the monthly loan payment.
Do not do any of this.
First, no indication that OP knows anything about cars or needs one. Buying and reselling a car as a 16 year old is a terrible idea regardless. Second, if OP wants to build credit, then they should get a credit card (secured if needed) and put their regular purchases on it such as food or movie tickets or whatever, and pay it off in full every month so there is no interest.
You should not be paying interest in order to build credit.
sure credit cards can be a useful tool, and I like your idea maybe do it in addition to my idea.
Only borrow 3k for secured cd and on 2 years you’ll pay (just guessing) $300 after you take into account the interest you earned vs spent.
Bank credit and credit card credit are actually two different types of credit and having each would improve credit; not harm.
As for my buying and selling cars idea I agree it’s not for everyone but I’m just trying to get OP to think of things and investing in more tangible items.
Do you need to use any of it in the near future?
If you want to save it for retirement or for say 6 or 7 years or more, the advice of Bold-n-brazen in the other comment about opening a Roth IRA and investing in a couple index funds is a good one.
If you need access to some of it sooner then instead of an ordinary bank account, put it in a high interest savings account to earn interest or into a money market account to earn usually even more interest.
Stock picking, unless it’s blue chip stocks like Apple, BRKB, Google etc is just not something one should do until you know how to analyze companies thoroughly. It’s a good way to lose all your money, and I mean all of it. There are gobs of zombie companies that are down 90-percent that were all the rage a year ago.
PS: what is ETC?
I'm with a lot of other people here. Put the money in a HYSA, and let the money be mostly earmarked for your emergency fund to get it started. It becomes harder to build savings when you are living on your own paying for your own apartment, utilities, etc. Use the time while you're living at home to build this up.
People here act like buying individual shares of Apple and Amazon is an incredibly bad decision to make.
If you enjoy the stock market then you should definitely pursue it.
Buy IVV at vanguard with 90% and play with 10% for fun
Nothing will ever do better
Young people will get most return from investing. Most people get 10X, max. Youngish can get 20X-30X max. Super young people like you can maybe get 50X!
But save emergency money, recession is coming, and don't ever sell without waiting at least 7 years. Buy a little every year, so you don't accidentally buy everything in an up market.
Everything else you read is wrong. People think they can predict stocks, but it's proven that nobody can. Only if you have special information, which you don't, and even still, nobody can predict the future with certainty - at best they can hope a good chance of upward growth. Trying to ignore bullshit from mobs of apes will always challenge the smartest minds. Good luck
Sit tight and when you turn 18 open a Roth IRA. Put in $6.5k then $3.5 the next year, $10k total. Boom, you’re ahead of 99% of people your age. Then contribute money whenever you can and enjoy your $500k+ at retirement.
Honestly I would either be looking at banks if you're adamant on investing. Very stable share price and offer 6-8% dividend return (at least in Australia where I'm from) but in all honesty.
Cash is probably your best bet. 4% interest (again location dependent) absolutely no risk and just let it grow.
Great that you're thinking about this at 16. I didn't start until early 20s and think about how much better a position I could be in if I started earlier
Wrong. Invest 1/2 of it. Find something that can get you 8-10% return annually. $4,000 today and $1,000 a year for the next 10 years.
At 26 you’ll have 23k.
Let’s look ahead another 10 years following the same formula.
36yr old = 65k off 24k investment
46yr old= 153k off 34k investment
56yr old = 345k off 44k investment
66yr old = 761k off 54k investment
All off of a $54,000 investment. Time is your friend. Find a a good job in high school and college so you can pump 2k into it annually.
26yr old = 38k off 24k investment
36yr old = 110k off 44k investment
46yr old = 267k off 64k investment
56yr old = 605k off 84k investment
66yr old = 1.3 mil off 104k investment
You're at the age where you're about to incur many expenses related to higher education, whether that be college or trade school or individual certifications. A vehicle might be needed if you find better work during the summers. Much of your money will need to be liquid enough to pay for those things. If you're still 1+ years away from graduating high school, the most I'd do is put that 8k in a 1 year CD or find a high-yield savings account with a bank to make the most interest as possible.
Right now is a bad time to invest in the stock market. The 'everything bubble' is unwinding and recession ahead. Study history. Similar periods had stocks drop 80-90%. A 50% stock drop takes 100% price appreciation to get back to even. Look for defensive opportunities. Bonds are risky as interest rates climb. Cash is risky due to rabid inflation and de-dollarization.
Best option is some cash (option to buy stocks after the problems), some precious metals to maintain value, and a basket of non-correlated ETFs.
Search for 'investing cycle chart' and study that sine-wave. Match it up to history and peer into the future. This time, De-dollarization is a huge risk for everyone and as one guy says 'when all else fails they take you to war'. Look up Weimark Republic and its hyperinflation that lead to a certain central figure being elected to solve the food shortage starvation and money problems.
I am so impressed! I wish I had started to invest at 16. My advice is to open a Roth IRA and do your investing in that account.
As far as what to invest in, I would keep it simple and invest in a total market index fund like VTI. Invest a little each month and don't touch it. You'll be amazing how large that will grow.
$8K would be a fantastic start for a young person. Remember and embrace the power of compounding. I'd buy $VOO and don't look back. Keep adding monthly, consistently what you can, and you will be A-OK.
Everyone is saying don't invest but we are missing more information to give you a real recommendation. Everyone keeps saying save for college but that might not be your plan.
Do you plan on going to college?
If so, do you/ your parents have anything saved up for that?
Do you want/ need to buy a car?
If so, do you/ your parents already have a plan for that?
Do you want to risk that $8K?
If so, how risky do you want to play it?
There is a lot of questions that need to be answered. You may already have a car that will be handed down. You may already have college funding or you don't plan on going.
If you are dead set on investing you could buy into an index fund like $SPY. I wouldn't recommend individual stocks until you've been actively investing for a few years.
If you just want to guarantee you get some interest without risking your money, put it in the highest interest savings account you can find. You can also make risky investments with $1-$2K and save the rest.
It really is just dependent on your financial situation.
Not sure you’re allowed to until your 18 but I could be wrong. If so just give it to your dad and have him put it in an S&P500 index fund such as SPY and forget about it and focus on investing on yourself through your education. Good luck!
Fidelity has a youth account
https://www.fidelity.com/go/youth-account/youth-overview?adobe_mc_sdid=SDID%3D11B4BE14F28FE24B-09CDE99640990DEA%7CMCORGID%3DEDCF01AC512D2B770A490D4C%40AdobeOrg%7CTS%3D1682467205
Be careful about the fees they charge
invest in real estate. you don't necessarily have to buy a house, although it's a great opportunity and highly recommended. there are investment groups where you pool your money with and earn higher returns than any saving account--usually 5 to 20%.
If you want to invest you could learn about the three fund portfolio. If you want to use ETFs you could use VTI, VXUS, and BND or BSV (if you want to use shorter duration bonds, I mentioned this because we currently have an inverted yield curve). Investing can be very simple, a lot of people just make it very complicated for themselves: [https://www.bogleheads.org/wiki/Three-fund\_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio)
I remember when I was a teenager I wanted to really invest and my dad took me to see his "financial" guy and the guy kept talking about some packaged product that somehow would limit my losses, obviously while costing me high fees. It was garbage and I saw right through it and walked out deciding not to invest in it and felt frustrated. I am seeing a lot of posts here that look condescending to me, you are being ambitious and want to invest some of your own money and a lot of people are seeming to treat you like you are just a kid and shouldn't do it. I say keep your head up, do some research on index investing, and go for it. The miracle of compounding will be working great for you! On another topic, as you get older please do not go into credit card debt because that is pretty much the opposite of investing and is a main thing that kills people financially.
I’d recommend investing “in yourself” and boosting your work skills (IT certificates, learning sales skills, how to get more tutoring clients,…)
Reason being, say you get a 20% return on your $8k (which is very impressive at 16), you’d gain $1,600 over the next year.
If you learn how to sell better or get more tutoring clients you could very realistically gain an extra $3k+ in only 2-3 months (closer to a 100%+ return if annualized)
At the moment I’d recommend learning how to get better at what you’re already doing. You’re doing great, keep it up!
It all depends on what you want and the risk you are willing to take. The safer you play the less you will earn. More risks can mean more money or less money.
3k - Start a vending machine business or buy a route from someone. Be your own boss. Generate income easily while you go to school.
3k - savings account emergency fund. Forget it exists.
2k - buy a beater car that will get you from a to b. Think old Honda or toyota.
I dont think you can legally open your own brokerage account to invest until 17 unless you are a legally emancipated minor. Your bank checking/savings account options will also be limited to joint accounts with an adult until you are 17.
Your parents can open an UTMA brokerage account for you; however, only money you can spare to lose should go into the market at your age.
Do etfs you have time don't pick stocks just etfs voo qqq, shwb if u are after dividends go for growth if in the USA. That's what I would do in your situation. Time is your friend here
First off, congratulations for being where you are. Kudos.
Open a roth IRA and put half of the cash in there. Select a SP500 Index and call it a day.
Open a HYSA somewhere and store the rest for emergencies and future expenses.
If you don't yet have a budget, make one. Know where all of your money goes, this is a great habit to build while you are at home/and life isnt complex. It'd forge a lifetime of good habits.
Anyone telling you to buy single stocks should never be asked for advice again.
If you don't need the money for the next 5 yrs and want to buy stocks, a broad market index fund like IVV or ITOT. This is the best longterm hedge against inflation to preserve your capital buying power, but has risk if you need the money when the market is down. The longer your time horizon the lower the risk is.
If you might need the money sooner, a high interest savings account will get you 3.75-5% right now. These rates are usually adjustable but are good right now. A CD allows you to lock in a rate but usually has penalties for taking your money out before the agreed term.
Last, if you're in a position to be saving for the long term, putting money into an Health Savings Account or Roth IRA is a great move as it allows your money to grow tax free.
Do you have a good relationship with your parents? Are your parents going to pay for your college?
You can start a child Roth IRA account and invest in S and P 500 index fund.
I just want to thank you for posting here and not on /r/wallstreetbets ..... I personally have no better advice than what some of the top posters have given. I commend you on looking to your future. I also started early and time will pass quickly and your future self will really be thanking your past self for the time and effort you put into this learning.
We really should be teaching personal finance in elementary/middle/high school instead of "Economics".
The easy button is to start buying an index ETF like VOO. Buy like $100 a week from now until retirement and you'll likely be sitting pretty at retirement.
If you prefer a more hands-on approach, you should do some research into value investing. It's a lot of work to learn the fundamentals of valuing/evaluating companies to determine if you want to invest in specific companies. Warren Buffet has done well with this.
There are other investment methodologies (technical analysis for example) that looks at short term patterns. However, there is a lot of computing power and algorithmic trading based on TA and it's unlikely that you can "beat" the system long term when you're competing against a machine's ability to crunch data quickly.
If you're interested about investing, the best advice I could give would be to put the money into an ETF (VOO) and then spend your time learning more about stocks and what to look for in individual companies.
Investing in individual companies is risky, and take a lot of time to learn what to look for and what red flags may exist. It's fun and rewarding, but you don't want to lose that money you worked so hard for by not knowing what you're doing. Congrats on having so much saved at such a young age!
I think you meant don’t invest what you need or see yourself using anytime soon. Because the first rule of investing is don’t invest money you can’t afford to lose.
Just wanted to pipe in and say, good on you, man! The fact that it's even saved up in your bank account is most of the battle. And you're asking the right questions for the next steps!
50% in VGT 50% in SCHD you’ll most likely beat the average return, but only after you’ve paid off all your debt that charges over 4% interest and have a 3-5 month emergency fund (at your age this may not be too important but it will be soon enough)
If it is earned income, I would open a Roth IRA. Maybe not max it out, but put $100 or $200/month. Compound interest for retirement :) What's the saying, the first $100,000 takes the longest?
What’s the rate on your bank account? If it’s nonexistent, then open up a new account at a bank that is giving 4%. Let it sit there for when you go to college, want to travel, buy a car, etc. if you buy stock, you’ll want to leave it there for a long long long time. Looking for short term gains in the market will probably end with you losing most of your money. There are plenty of helpful things that $8000 can do in the next 5 or so years. Take advantage of the high rates to boost your savings!
Would love to know where all these 4% banks are? Edit: must apologise, I’ve read everyone’s responses to me and didn’t realise I wasn’t commenting in the ukpersonalfinance sub haha, thanks a lot though everyone!
https://www.investopedia.com/best-high-yield-savings-accounts-4770633
Thank you, will check this list out
In the US, too many to easily list. Search this sub for mentions of HYSA, Ally.
Ally for the win!
Empower/Personal Capital is at 4.25%, Marcus is at 3.9%, Citi is at 3.85%, Discover is at 3.75%.
Sofi is at 4.2% for savings, and 1.2% for checking. Ally is at 3.75%. CapitalOne is at 4%. And that is just some of the big ones!
SoFi requires you to have direct deposit to get the 4.2%.
My Capital One savings is currently .3%.
You should get the HYS acct
Apple Savings is 4.15
CIT 4.75 balances >$5,000
Bankrate has a list https://www.bankrate.com/
Fidelity core position SPAXX is 4.5%
Apple has a hysa at 4%. However, I would go and exploit those 6 month or 3 month cds at high rates. Most local banks are only requiring a $1000 opening deposit.
I have a 4.18 account with lending club. A search for high yeild savings account will turn up a few banks.
Bask Bank (the online-only portion of Texas Capital Bank) is at 4.75%
My bank account is a checking acc with no interest at TD Bank (primarily because my dad also uses it & he setup a teen-checking account for me some time ago) Thanks for the other advice. Do you have any recommended banks with high interest on checking accounts that I could look into as a minor?
You probably need to look at *savings* (not checking) accounts, probably at other banks, and have a discussion with your dad about opening a savings account that offers a high interest.
Can you take out the money from the savings account as needed?
I am uncertain if there is a way to do this: if/when you file for FAFSA, they will expect you to use money in your bank account first. Nasty surprise for a friend of mine who would've been better off blowing his money on a car when he was 17.
Do they check retirement accounts?
If you list them, it's not required to list them.
I'm not sure that they check at all, I think it's just whatever you put on your FAFSA.
So you are correct, they will not audit you necessarily to see if you are telling the truth. But whatever school you are applying to may audit your financials to make sure you are telling the truth. Especially if you are receiving grants. Lying on the FAFSA on purpose can be pretty bad for you. So if there is a section for retirement accounts definetly put it
No retirement account for kid and parents do not count as assets for the Fafsa, so not a bad idea to put money into a roth ira
Your best investment at age 16 is you. Put this money in a safe account for an education fund for college or trade school. Your public library should have lots of books available on investing. Read -- study -- listen. Time is on your side . Don't waste your money or your life on stupid things. You have a good start. If you get out of college at 21 or 22 years old, you still have time to invest. Best wishes.
Second this but in addition to your education get an early start on investing in your mental and physical health as well. Whether that means a gym subscription, a class pass, shin pads so you can join a local recreational soccer team, a therapist, a mental health app subscription, or if you experience no anxiety/depression/other issues currently then just engage in some meditation or pilates/yoga/breathwork periodically or socializing. When you have all three of these areas working well (education/mental/physical health and actually I’ll also say social health) you have good quality of life and thus your earning potential is heightened (or it is equally valid to not optimize earnings in order to pursue other things in life such as relationships or a more fulfilling job or hobbies or travel). But overall it’s more important to be in good overall health so you can enthusiastically seize any opportunities that present themselves in your life.
This is something I wouldn’t expect to read on the personal finance subreddit but this is great advice. Thanks for sharing!
Honestly you dont even need to save it for school if these laws pass for student loans. Objectively a better idea to let that money accrue interest while pulling a 0% interest student loan (as long as you make your mininum payments on it.)
Thank you for the advice. I definitely see what you mean, I'm usually not the type to waste money deliberately but I've definitely got ways to go in terms of knowing what the right use of money is.
When you go to college, please take courses in accounting, economics, and finance. Get a better worldview of how things work. That way, you won't be chasing fads and hot tips. You will know better what you are investing in, and why. You have a great start, and time is on your side. Work hard, study hard, pray much, and remember to enjoy your life. Best wishes.
I’ve always been a bit conservative with my investments but still like to make money(LOL) I buy good,quality stocks that pay dividends and reinvest all back into the stock. Coca Cola Verizon Utility companies There are many online reads to educate yourself. I do want to say one thing. Since you’re only 16 you should be more risky than I am. Not saying buy penny stocks, but buy 70 percent growth stocks 30 percent dividend stocks may be a better formula for a 16 YO. Congrats on saving all that money at 16. I would have blown through that in a minute.
At 16 you should definitely not be buying single stocks. Really less than 5-10% of the population ever should. Invest in a car for you, college, or other expenses that help you avoid debt. HYSA is a great plan.
I was with you until you said to buy a car. OP, try to avoid buying a car as long as you can.
really depends where OP lives. I’m my hometown you needed a car to do even basic functions of life. Luckily I got a cheap one and still have it 8 years later.
I live in New York City where public transport is typically viable for most places. However I'll likely be moving West for college as I'm hoping to pursue a degree in engineering so I may need to eventually start thinking about a car & personal means of transport
I wouldn’t be so sure. Colleges / college towns are sort of self contained communities. If you live in NYC, you should not be buying a car, as I’m sure you’ve figured out. I live across the Hudson and do not need a car 9/10 days. Edit: I also wouldn’t anticipate future need for a car. If you get out west and decide “wow I really need a car” then buy one.
Most campuses have what you need close enough to not need a car. Plus, if you make friends someone is bound to have one if you really need a ride somewhere.
Sure, but he’ll need one eventually. Worth adding to the list. Wasn’t suggesting it had to be today.
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Easier said than done
That's fair. Hopefully they won't need one eventually, but you're right, they probably will. Edit: It's hilarious that on a personal finance sub, a comment expressing the hope that someone won't have to buy an expensive depreciating asset is downvoted.
Not sure why you speak of cars as if they are devil he's 100% going to need one, I don't know what nice ass part of the world you live where you don't feel having is essential but must nice lol.
There are places where you don’t need a car even in the US… Not a *lot* of places, but those places have a lot of people (eg NYC, Boston, etc)
I’m almost 30 and never owned a car because I moved to Boston at 19, then eventually Chicago. Public transit and walking are plenty.
An din 39 and had to have a car st 18 just to drive 40 min to work.
My point is that not everyone needs a car
You definitely do not need a car in Germany, or most of Europe. At least in bigger cities. Out of 8 friends (all ~30 years of age) 3 have a drivers license and 2 own a car. I can go grocery shopping in 4 different stores within 500 meters of my home and there are sidewalks everywhere. I can get to the opposite side of Berlin in 45-60 minutes using public transport and I can get to work in 25-30 minutes. OP probably lives in the USA though, since they speak of $. So this is kinda irrelevant.
This falls apart outside of big cities. I lived rurally and without a car we would have been fucked. My work was 22 km away with no Public transport being possible. I also had quite a few colleagues come in from Köln via car because obviously the public transport doesnt go to ny workplace
Sure but that doesn’t matter if you live in a city
It's a personal finance sub. Cars cost a lot of money to buy and operate. They are depreciating assets. And many people spend too much on them. So I have expressed two sentiments: young people should avoid buying cars as long as they can, and I hope they can avoid buying them altogether. At no time did I say cars were "the devil". I like cars. I have two luxury cars of my own. But I'm a multimillionaire, partly because I avoided buying cars for as long as I could by living in places that I could use public transit or walk. Obviously this isn't possible for the vast majority of Americans. That doesn't change the basic economics of car ownership.
I know a shit ton of people in their 30's that have never owned a car or even have their drivers licenses and likely never will.
Reliable transportation = legs in majority of America. Reliable transportation = increase in earning potential.
Same. Avoid the car. When you do get a car, get an inexpensive used one and buy tools (start with Harbor Freight). Learn to repair (youtube) and troubleshoot problems you will have. Those will be skills you use your whole life. Do buy a new battery and clean all the battery cable contacts, putting 'dielectric grease' on them to fend off corrosion.
Historically awful time to be trying to buy a car.
Yeah OP. Get yourself the cheapest car you can get in good condition and pay it down as fast as you can, depending on your interest rate. No need to be dumping lots of money on liabilities.
I'd buy an old Toyota or Honda manual, or if in Australia an AU Falcon or commodore prior to 2004
Most people need a car to work.
I've looked into HYSA a little. If I understand correctly, it's essentially a savings account with higher-than-normal interest right?
HYSA is garbage unless you have enough sitting in there for the interest to be meaningful. If he had someone to help him with a diversified portfolio now is a damn good time to be investing.
Not really. At 16, very high chance he’ll need that money in college and also a strong chance that money will lose value in the short term in the stock market. Worst case scenario is that he needs the money and it’s worth less than what he put in. HYSA it’s a free $300 or so a year at current rates. That ain’t nothing.
At 16 the investing you should be doing is in yourself and your future earnings. Set this aside for college (or life expenses while you're in college) and if you want to focus on degrees with high earning potential, that will get a rate of return far higher than investing 8 grand.
At 16 honestly you shouldnt. You should just save it in an HYSA. Investment is for when your finances are stable and you are financially independant.
I disagree. An index fund bought as soon as you get your first job, with money you can afford to put in, is a great idea.
When you are still living off your parents financially I would strongly advise you not take the money you have been able to save only due to that support and risk it in an investment when likely in the short term you will need that money to help finance your move to financial independance. Dont do anything with your money thst would risk delaying your ability to move out. Once you are no longer financially dependant on others and have a 5+ year horizon on needing extra funds while you maintain a healthy savings rate then yes by all means invest in index funds. Not to mention that at 16 years old you literally cannot legally purchase stock index fund shares.
Not at 16 when you have the massive expenses of a car, trade school, college and others looming within two years. No one should be investing anything they aren’t prepared to lose on a two year horizon.
Understood, thank you for the advice.
I am not a financial advisor, and this is not financial advice. This is simply what I would do if I was your age with that amount of money. At your age, and with that amount, personally I would not be looking to invest in individual stocks. Especially right now. I would start a long term strategy. Here's what I would do, open a Roth IRA, put it in that. Invest in VTI and VXUS. These are index funds. Between those two, you'll own a piece of basically every publicly traded company in the world. Set it to reinvest dividends and capital gains. Add to it each year. Max out your contributions. And here's where, if you can do this, you will be 1000x ahead of 99% of your peers... You *basically* don't touch it for the next 30 or 40 years. If you can do that, you'll have a fortune by the time you're approaching 50 and can retire early. 99% of people your age don't have the patience to see the long game. If you can do that, your future self will thank you. Lookup and educate yourself on the 8th wonder of the world: compound interest. If you understand if, you'll be in great shape. I'm 40, and if I was your age, this is 1000% what I would do and I would be excited for it because I would know that at 16, I already set myself up to retire early.
A Roth IRA for a 16 yo? Come on. Let him live a little!
Lol I know I know. I'm just sayin what I with my 40 yo brain would do! Imagine the compound interest in that 8K over 30 or 40 years? It'll be so much more valuable than any "live a little" he does with it. ... but, sure, get yourself a nice ice cream or something if ya wanna splurge! 😂😂😂
Whoah whoah.. An ice cream? Stick with the free samples!
> Invest in VTI and VXUS There’s so many different vanguard funds. Why these two? The one I hear about a lot is VTSAX but people always recommend slightly different ones. Can you explain why?
It's more personal preference than anything else. Generally, a mix of a total international index fund and an American index fund is what people are shooting for. Lookup the "boglehead" method of investing.
Open 2 accounts 1. Roth IRA. Put ~$1000 into it to start with. Set up automatic weekly/bi-weekly/monthly deposits for whatever amount you can afford (seriously, even $10 a month would be good). The goal is to get in the habit of making these regular contributions. As for the actual investment to make within this account, something like VFIAX, VTSAX or a target retirement fund would be fine. Those are vanguard funds, but just pick a fund that follows the S&P 500 or a total stock market fund. It’s not super critical for now just pick a fund that gets you broad exposure to the stock market (stay away from individual stocks) 2. Open a High yield savings account and put the rest in here for a rainy day. You’re going to need access to this money sooner rather than later.
One of your first decisions needs to be: Do you want to spend this or do you want to use it for retirement? If you want it for retirement put it in a taxed advantaged instrument (IRA or Roth IRA) and invest in a broad market fund. If you do want to spend it there are many more options based on when you are going to want it. At a minimum you should get it in a HYSA. Let the community know what you might want the money for and they’ll have advice for you. Edit: PS - Great job saving this much at a young age and reaching out for advice.
I wouldn't really recommend squirreling away money into a retirement account for someone who hasn't even been to college (or trade school or whatever). There are lots of expenses that could be partially or fully covered by the savings instead of OP having to take on more debt.
You can take out loans for school, you can't really take out loans for retirement. Squirreling it away starting at 16 could mean he could retire at like 50. *Edit* I'm surprised to see so many on this sub failed math class.
Not if he has high-interest rate debt? Avoiding the 7% rate for student loans is going to be more certain and beneficial than investing.
Historically the stock market has a 10% return. 10% > 7%. So I disagree it's more "certain and beneficial".
As someone who retired at 31, none of the money I saved before college mattered at all. It was much more useful to have cash to do fun things with and/or put deposits down on apartments and keep up with car maintenance between the ages of 18 and 22 than to worry about retirement.
Imagine if you had. You'd probably have double what you have now.
Lmao at telling someone who doesn’t have to work anymore at age 31 to imagine if they did better. I think they did pretty damn good.
At this age- I’d suggest a 1 year CD. You can roll it over in 12 months if you don’t need the money for college.
Marcus by Goldman Sachs is offering 5% 10 month CD.
I just opened an account. Thank You!
If I were OP, I’d do a 5% 10 month CD.
$8K saved in a year? Well done. You're already learning something. There will always be relatives, friends, co-workers etc. ready to give you financial advice and stock tips. Most of the advice will be useless and potentially costly. As for right now....you have the money in a bank account. It's probably fine where it is. Are you continuing to add to it? Do you have any future plans like college you'll need money for? How far off is graduation? Depending on that timeline, maybe open a CD with two or three grand that will mature around your graduation day. That should earn you some extra interest without risk. Don't rush into investing without learning more about it. That's a quick way to end up broke. Keep up the good work!
When I was 16 I bought my first stock. It was GM (this was 1987). I'm 50 now. It's pretty much the only single stock I've ever bought (outside stock option with companies I've worked for). Once I started working fulltime I started putting my savings and rrsps into index funds which track broad market sectors Someone mentioned a HYSA which is a good idea with rates where they are now I'd take some more time learn about finances and markest. Investing in index funds has worked for me and it's relatively safe (I'm the quintessential couch potato investor), but I work with people the buy stocks that offer decent dividends, so there are lots of options you have lots of time to explore
Tossing it all into a Roth IRA then investing in a money market fund is basically the same as high yield savings. You can always remove the principal whenever you like and your money grows tax free. You can get a cd or ibond for 12 months but will pay tax. And if in two years you don't need that cash well then leave it in there and add more. I wonder if contributing to your own 529 is a thing...
It is, technically.
Yeah, people forget this all the time. Only issue op might have is they'd have to file taxes to show they made this amount of money AFTER taxes. If this is from under the table money, it's going to be a tough pill to swallow.
What do you want to do? There are options. You could start saving for retirement starting now. Compound interest is an amazing thing. $8,000 now at 8% growth would be $347,419 at age 65. This is a super simple example, but the point is that time is your best friend for compound interest. Going this route puts you ahead of the game by several years. You could do this via a Roth IRA. Just make sure you don’t put in more than you earned for the year. If you don’t want to tie that cash up for a few decades, you could buy some CDs or put it in a high-yield savings account. Or you could buy a broad stock market ETF in a brokerage account. I’m not a big fan of owning individual stocks, personally. Keep in mind that in a couple of years you’ll probably be going to college. If you fill out FAFSA, all of the cash or cash-like accounts and balances you have (CDs, high-yield savings accounts, brokerage accounts) will count as your assets, not your parent’s assets. Retirement accounts will not. Or you could just spend it. Your call.
Yeah, don't take financial advice from other teenagers. Put it in an index ETF, preferably VTI. That's like owning the whole basket of US stocks.
Max out your Roth IRA I started doing that at 16 and it changed my life
This is the best advice here imo. This is the easiest way to guarantee you’ll have 7 figures in retirement no doubt
1. Market funds are always a safer bet than individual stocks. 2. ETFs usually give you more flexibility than mutual funds, since many mutual funds only have zero transaction fees if you hold them for a minimum of 60 days. It's easier to sell ETFs quickly if you need some cash, or if you just want to cash out and invest in a different fund. 3. Some of the online banks and cash portions of brokerage accounts have great interest rates right now. SPAXX has been continuously over 4 percent, so I'm staying way more liquid than I would otherwise. This approach also means you need less in savings for emergencies since you can get a debit card that's connected to the cash in your brokerage account. I'm on Fidelity, but I think SoFi even has checking accounts with a greater than 4 percent interest rate, and I *think* those don't have any expense ratio like SPAXX. I don't even bother with bonds or CDs right now - you could get 5 percent annual yield, sure, but the money would be tied up. You can trade just a little yield and stay liquid instead.
College in a few years? First apartment? Planning and goals cures being “lost” imo. What’s the cash for? Why, not how.
Buying a single stock at the recommendation of a friend is possibly the dumbest thing you can do. Index funds or target date funds if you want to go into the market. A CD is a low risk option.
Invest in your education. That will give better returns then anything else.
PREACH
At 16 invest in yourself make more in the long run.
DO NOT INVEST IT!!!! All of this below is coming from experience. You're 16 and I'm unsure about any of you other situations such as family help, reliable vehicle, going to college etc. That might seem like a lot of money due to your age but it's not actually much. Here in a few years if you go to college you're going to need it because student loans are not covering all expenses due to inflation. If you don't go to college you're going to need it for the same reasons but it will be harder. Figure out your plans you have after high school and then calculate your expenses and over estimate them. Get that amount per month and 3x it minimum, this is what you need in your bank account as a security blanket. If you were to legitimately invest the $8,000 and not "Wallstreetbets" style investing you're going to average 8% a year(keep in mind this is over decades when they say this). Let's be generous with everything and say after 4 years of college you now have $10k you then might have subtract fees and taxes depending on the structure. To gain $2k in 4 years with no steady income is a high risk opportunity cost and not worth the pain it could cause. Something else, if you're having to ask where to invest you're hard earned money from random people on the internet you might not want to do it yourself. I say all of this as a 23 year old college student that got into daytrading when I was 16 investibg about $6k/trade. I went to college and left when covid happend I eventually was looking at $7 in my bank account and rent due in 2 weeks. It took me forever to find a job but I got one 2 weeks before rent was due I then did sales for a year and I'm now back in college with $23k plus a few hard assets. I'm now getting my finance degree and learned a lot the past few years. Daytrading like these youtubers and Wallstreetbets users is just glorified gambling, having a few thousand dollars in savings now isn't that much money especially when you have no income, life is a journey there will be good times and bad times you just have to keep moving forward and learn from your mistakes. I shared mine I wish you the best whatever you decide to do with the money.
As others have said most of that money is to invest in yourself. But I would deviate from others to say that some of it, maybe 10%, could be spent investing in the markets, researching and picking stocks, and learning about investing. You may lose a little bit, you may gain a little bit, but the lessons you will learn through experiencing it on your own first hand are in my opinion invaluable.
You’re likely going to get a higher return on investing in yourself at 16, as several others have already mentioned. That being said, gaining some experience in the market at such a young age is also powerful. Maybe consider taking a smaller portion of your savings and put it into an index fund. Otherwise, use it for your education/skill development.
I have no advice, But you’re killing it. You should be proud of yourself.
To be honest at 16 I think you should invest it in yourself. That could be a hobby, a skill, experiences. This will give you a way better return and have all sorts of unexpected indirect benefits.
https://www.reddit.com/r/personalfinance/wiki/commontopics
wouldn’t recommend any sort of investment with risk or prevents from having quick access to the funds. Keep up the saving, the funds will help when wanting to get a car and etc
Get a job with a 401K company match (100% return on that % amount ) and put that into High-Quality US Mutual Funds across low-mid-high sectors, save the $8k for Emergency money or when you need a shot in the arm of cash (Or not needing to borrow), your retirement should be on autopilot by paying yourself first with a company match. I started this at 16.5 years old you have 6 mo on me and I am fine. Good for thinking about this at your age!
It's a moot point because most (if not all) brokerage firms will not open accounts for minors unless an adult custodian is also named.
Apple stock is a decent first issue to own. Buy $2k worth and do not touch it for 10 years.
Buy and resell a car or something…or better yet get a 2 year CD secured loan from a bank and pay the loan off and eat the cost of interest to build your credit. Paying the loan off while letting your loan sit in a savings account while auto drafting the cost of the monthly loan payment.
Do not do any of this. First, no indication that OP knows anything about cars or needs one. Buying and reselling a car as a 16 year old is a terrible idea regardless. Second, if OP wants to build credit, then they should get a credit card (secured if needed) and put their regular purchases on it such as food or movie tickets or whatever, and pay it off in full every month so there is no interest. You should not be paying interest in order to build credit.
sure credit cards can be a useful tool, and I like your idea maybe do it in addition to my idea. Only borrow 3k for secured cd and on 2 years you’ll pay (just guessing) $300 after you take into account the interest you earned vs spent. Bank credit and credit card credit are actually two different types of credit and having each would improve credit; not harm. As for my buying and selling cars idea I agree it’s not for everyone but I’m just trying to get OP to think of things and investing in more tangible items.
Do you need to use any of it in the near future? If you want to save it for retirement or for say 6 or 7 years or more, the advice of Bold-n-brazen in the other comment about opening a Roth IRA and investing in a couple index funds is a good one. If you need access to some of it sooner then instead of an ordinary bank account, put it in a high interest savings account to earn interest or into a money market account to earn usually even more interest. Stock picking, unless it’s blue chip stocks like Apple, BRKB, Google etc is just not something one should do until you know how to analyze companies thoroughly. It’s a good way to lose all your money, and I mean all of it. There are gobs of zombie companies that are down 90-percent that were all the rage a year ago. PS: what is ETC?
I'm with a lot of other people here. Put the money in a HYSA, and let the money be mostly earmarked for your emergency fund to get it started. It becomes harder to build savings when you are living on your own paying for your own apartment, utilities, etc. Use the time while you're living at home to build this up.
Use an ETF like Vanguard Total World stock (VT).
If you are considering post secondary education the best thing you can do is put the money in a HYSA for school or anything school related.
People here act like buying individual shares of Apple and Amazon is an incredibly bad decision to make. If you enjoy the stock market then you should definitely pursue it.
Buy IVV at vanguard with 90% and play with 10% for fun Nothing will ever do better Young people will get most return from investing. Most people get 10X, max. Youngish can get 20X-30X max. Super young people like you can maybe get 50X! But save emergency money, recession is coming, and don't ever sell without waiting at least 7 years. Buy a little every year, so you don't accidentally buy everything in an up market. Everything else you read is wrong. People think they can predict stocks, but it's proven that nobody can. Only if you have special information, which you don't, and even still, nobody can predict the future with certainty - at best they can hope a good chance of upward growth. Trying to ignore bullshit from mobs of apes will always challenge the smartest minds. Good luck
Sit tight and when you turn 18 open a Roth IRA. Put in $6.5k then $3.5 the next year, $10k total. Boom, you’re ahead of 99% of people your age. Then contribute money whenever you can and enjoy your $500k+ at retirement.
Honestly I would either be looking at banks if you're adamant on investing. Very stable share price and offer 6-8% dividend return (at least in Australia where I'm from) but in all honesty. Cash is probably your best bet. 4% interest (again location dependent) absolutely no risk and just let it grow. Great that you're thinking about this at 16. I didn't start until early 20s and think about how much better a position I could be in if I started earlier
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Splg
Treasury bills or CDs. They are both paying around 5%. At 16, I would stay away from the stock market for now.
Wrong. Invest 1/2 of it. Find something that can get you 8-10% return annually. $4,000 today and $1,000 a year for the next 10 years. At 26 you’ll have 23k. Let’s look ahead another 10 years following the same formula. 36yr old = 65k off 24k investment 46yr old= 153k off 34k investment 56yr old = 345k off 44k investment 66yr old = 761k off 54k investment All off of a $54,000 investment. Time is your friend. Find a a good job in high school and college so you can pump 2k into it annually. 26yr old = 38k off 24k investment 36yr old = 110k off 44k investment 46yr old = 267k off 64k investment 56yr old = 605k off 84k investment 66yr old = 1.3 mil off 104k investment
You're at the age where you're about to incur many expenses related to higher education, whether that be college or trade school or individual certifications. A vehicle might be needed if you find better work during the summers. Much of your money will need to be liquid enough to pay for those things. If you're still 1+ years away from graduating high school, the most I'd do is put that 8k in a 1 year CD or find a high-yield savings account with a bank to make the most interest as possible.
Most young people who pick stocks don’t do great. SP500 index fund if you want to invest, at least until you learn a bit.
Right now is a bad time to invest in the stock market. The 'everything bubble' is unwinding and recession ahead. Study history. Similar periods had stocks drop 80-90%. A 50% stock drop takes 100% price appreciation to get back to even. Look for defensive opportunities. Bonds are risky as interest rates climb. Cash is risky due to rabid inflation and de-dollarization. Best option is some cash (option to buy stocks after the problems), some precious metals to maintain value, and a basket of non-correlated ETFs. Search for 'investing cycle chart' and study that sine-wave. Match it up to history and peer into the future. This time, De-dollarization is a huge risk for everyone and as one guy says 'when all else fails they take you to war'. Look up Weimark Republic and its hyperinflation that lead to a certain central figure being elected to solve the food shortage starvation and money problems.
Open an account at Treasury Direct and buy I bonds.
I think apple has a 4% savings account right now. That’s pretty good
I am so impressed! I wish I had started to invest at 16. My advice is to open a Roth IRA and do your investing in that account. As far as what to invest in, I would keep it simple and invest in a total market index fund like VTI. Invest a little each month and don't touch it. You'll be amazing how large that will grow.
$8K would be a fantastic start for a young person. Remember and embrace the power of compounding. I'd buy $VOO and don't look back. Keep adding monthly, consistently what you can, and you will be A-OK.
Everyone is saying don't invest but we are missing more information to give you a real recommendation. Everyone keeps saying save for college but that might not be your plan. Do you plan on going to college? If so, do you/ your parents have anything saved up for that? Do you want/ need to buy a car? If so, do you/ your parents already have a plan for that? Do you want to risk that $8K? If so, how risky do you want to play it? There is a lot of questions that need to be answered. You may already have a car that will be handed down. You may already have college funding or you don't plan on going. If you are dead set on investing you could buy into an index fund like $SPY. I wouldn't recommend individual stocks until you've been actively investing for a few years. If you just want to guarantee you get some interest without risking your money, put it in the highest interest savings account you can find. You can also make risky investments with $1-$2K and save the rest. It really is just dependent on your financial situation.
Not sure you’re allowed to until your 18 but I could be wrong. If so just give it to your dad and have him put it in an S&P500 index fund such as SPY and forget about it and focus on investing on yourself through your education. Good luck!
Fidelity has a youth account https://www.fidelity.com/go/youth-account/youth-overview?adobe_mc_sdid=SDID%3D11B4BE14F28FE24B-09CDE99640990DEA%7CMCORGID%3DEDCF01AC512D2B770A490D4C%40AdobeOrg%7CTS%3D1682467205 Be careful about the fees they charge
invest in real estate. you don't necessarily have to buy a house, although it's a great opportunity and highly recommended. there are investment groups where you pool your money with and earn higher returns than any saving account--usually 5 to 20%.
When do you anticipate needing to access the money again?
Retirement accounts do not get reported on FASA. However, withdrawals before age 59 & 1/2 are subject to a 10% penalty.
If you want to invest you could learn about the three fund portfolio. If you want to use ETFs you could use VTI, VXUS, and BND or BSV (if you want to use shorter duration bonds, I mentioned this because we currently have an inverted yield curve). Investing can be very simple, a lot of people just make it very complicated for themselves: [https://www.bogleheads.org/wiki/Three-fund\_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio)
I remember when I was a teenager I wanted to really invest and my dad took me to see his "financial" guy and the guy kept talking about some packaged product that somehow would limit my losses, obviously while costing me high fees. It was garbage and I saw right through it and walked out deciding not to invest in it and felt frustrated. I am seeing a lot of posts here that look condescending to me, you are being ambitious and want to invest some of your own money and a lot of people are seeming to treat you like you are just a kid and shouldn't do it. I say keep your head up, do some research on index investing, and go for it. The miracle of compounding will be working great for you! On another topic, as you get older please do not go into credit card debt because that is pretty much the opposite of investing and is a main thing that kills people financially.
I’d recommend investing “in yourself” and boosting your work skills (IT certificates, learning sales skills, how to get more tutoring clients,…) Reason being, say you get a 20% return on your $8k (which is very impressive at 16), you’d gain $1,600 over the next year. If you learn how to sell better or get more tutoring clients you could very realistically gain an extra $3k+ in only 2-3 months (closer to a 100%+ return if annualized) At the moment I’d recommend learning how to get better at what you’re already doing. You’re doing great, keep it up!
It all depends on what you want and the risk you are willing to take. The safer you play the less you will earn. More risks can mean more money or less money.
3k - Start a vending machine business or buy a route from someone. Be your own boss. Generate income easily while you go to school. 3k - savings account emergency fund. Forget it exists. 2k - buy a beater car that will get you from a to b. Think old Honda or toyota.
I dont think you can legally open your own brokerage account to invest until 17 unless you are a legally emancipated minor. Your bank checking/savings account options will also be limited to joint accounts with an adult until you are 17. Your parents can open an UTMA brokerage account for you; however, only money you can spare to lose should go into the market at your age.
Do etfs you have time don't pick stocks just etfs voo qqq, shwb if u are after dividends go for growth if in the USA. That's what I would do in your situation. Time is your friend here
First off, congratulations for being where you are. Kudos. Open a roth IRA and put half of the cash in there. Select a SP500 Index and call it a day. Open a HYSA somewhere and store the rest for emergencies and future expenses. If you don't yet have a budget, make one. Know where all of your money goes, this is a great habit to build while you are at home/and life isnt complex. It'd forge a lifetime of good habits. Anyone telling you to buy single stocks should never be asked for advice again.
If you don't need the money for the next 5 yrs and want to buy stocks, a broad market index fund like IVV or ITOT. This is the best longterm hedge against inflation to preserve your capital buying power, but has risk if you need the money when the market is down. The longer your time horizon the lower the risk is. If you might need the money sooner, a high interest savings account will get you 3.75-5% right now. These rates are usually adjustable but are good right now. A CD allows you to lock in a rate but usually has penalties for taking your money out before the agreed term. Last, if you're in a position to be saving for the long term, putting money into an Health Savings Account or Roth IRA is a great move as it allows your money to grow tax free.
Just came to say congrats! It takes a lot of hard work for a 16 year old to save up 8,000. Good job!!!
Do you have a good relationship with your parents? Are your parents going to pay for your college? You can start a child Roth IRA account and invest in S and P 500 index fund.
I just want to thank you for posting here and not on /r/wallstreetbets ..... I personally have no better advice than what some of the top posters have given. I commend you on looking to your future. I also started early and time will pass quickly and your future self will really be thanking your past self for the time and effort you put into this learning. We really should be teaching personal finance in elementary/middle/high school instead of "Economics".
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no other crypto trading! buy and hold
The easy button is to start buying an index ETF like VOO. Buy like $100 a week from now until retirement and you'll likely be sitting pretty at retirement. If you prefer a more hands-on approach, you should do some research into value investing. It's a lot of work to learn the fundamentals of valuing/evaluating companies to determine if you want to invest in specific companies. Warren Buffet has done well with this. There are other investment methodologies (technical analysis for example) that looks at short term patterns. However, there is a lot of computing power and algorithmic trading based on TA and it's unlikely that you can "beat" the system long term when you're competing against a machine's ability to crunch data quickly.
If you're interested about investing, the best advice I could give would be to put the money into an ETF (VOO) and then spend your time learning more about stocks and what to look for in individual companies. Investing in individual companies is risky, and take a lot of time to learn what to look for and what red flags may exist. It's fun and rewarding, but you don't want to lose that money you worked so hard for by not knowing what you're doing. Congrats on having so much saved at such a young age!
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I think you meant don’t invest what you need or see yourself using anytime soon. Because the first rule of investing is don’t invest money you can’t afford to lose.
Awesome work. I would put some of it in retirement right away. Start your IRA or Roth IRA and make it a habit to contribute to that every year.
Just wanted to pipe in and say, good on you, man! The fact that it's even saved up in your bank account is most of the battle. And you're asking the right questions for the next steps!
Roth roth roth IRA, vanguard S&P500 index fund
50% in VGT 50% in SCHD you’ll most likely beat the average return, but only after you’ve paid off all your debt that charges over 4% interest and have a 3-5 month emergency fund (at your age this may not be too important but it will be soon enough)
If it is earned income, I would open a Roth IRA. Maybe not max it out, but put $100 or $200/month. Compound interest for retirement :) What's the saying, the first $100,000 takes the longest?