There's an awful lot of negativity here, but as someone who's 55 and has earned a good wage since I was 17, I really wish I had taken investing more seriously from the very beginning. While I knew of compound interest, I really didn't understand it until like a decade ago. If I'd started putting 5% of my money into a target retirement plan from 17, I'd be retired now. As it is I'm not doing badly, but I really wish I'd started earlier.
So I say: Good on you.
Somewhat related: I just got my son set up with a custodial account and put his "kid retirement" plan into it, and let him pick a couple stocks to put some money into, and put the majority of it into target retirement and a few stocks and EFTs, so he can get some ideas of how they perform, make it a little fun with picking things he's into, and also follow ups and downs of the market, all of which I think is good education.
Investing for retirement at 17 is a bad idea! At 17 you should still be thinking about investing in education - the right education investment today will pay back far more than any other monitory investment. There are of course bad education investments, and some are not willing to study even more (or not able to pass a good education course), in that case retirement might be the best investment you can make, but it should not be your first choice.
A different reply said they waited until 26 to start - that is probably about the right time to start saving for retirement. Maybe a little late, but close enough. Before about that age you are still getting started and so you have little spare cash. You need to pay off school loans (if you took any). You need to save for down payment on a house, and buy a lot of those will last a lifetime household items everyone needs. You should be thinking about marriage and saving for it (even if you don't get legally married most people will live with someone else and should be planning on how to make that life work).
Most important: you don't know how long you will live. Save for the future, but not everything - you have no guarantee you will live to tomorrow - if you are under 60 odds are strongly in favor of it, but people die young all the time. You should have a little play money as well in your budget. Go climb Mt Fuji while your body is young and healthy enough to do so (I picked a random activity here, you should decide what you care about, not rush to Japan)
If you start investing a small amount at age 17 you can build the habit and increase totals later.
Saying "I'll do it later when it is rational" often translates to "I won't do it (for a long time)". Which is not rational
This is true of most money behaviors! My mom taught me the same thing about giving.
And even today, knowing way more about personal finance than I did at the start of my working life, I'm still amazed at how blocking out money in the budget astronomically increases your chances that that money actually goes to the thing you want.
"My mom taught me the same thing about giving."
care to share what you learn???
They mean don't wait till you're rich to start giving charity. Just give what you can when you can. Many people tell themselves they are great people because of all the money they'd give away just as soon as they are rich enough to do it but die without giving anything.
More or less: yup.
The great thing about saying "give 10%" is how well it scales.
Except it doesn’t. If you’re poor, 10% directly impacts your life negatively. It means less (or lesser quality) food. It means less money set aside for yourself in the case you need it — and you will.
10% for middle class is fine. That’s just one less night out.
People should not give to charity if they themselves are likely to be dependent on charity.
I could get into virtue ethics or religion but I know this is Hacker News, so maybe I can frame it like this:
Telling people to wait until they're financially stable before giving risks creating a dynamic where people never start. The person who says "I'll give when I can afford it" at $30k is likely to say the same thing at $100k, because the scarcity mindset scales with income.
Small-scale giving early on helps build the identity and habits of someone who contributes to their community rather than just consuming from it.
And arguably there are network effects formed from generosity of time/money that can bring long-term benefits as well. It's a spicier idea, but I could even suggest that giving helps you see money as a tool rather than as security itself.
Yeah no. I used to let people of a higher social order (politicians and media figures) guilt trip me into giving to charity when they themselves just conjure money from taxes I’ve already paid, while the rare few times I’ve needed help due to work injuries the state nor charities were never there for me.
I will help my neighbours and my friends first, real people who will also be there for me. And when it comes to charity for foreign nations, I will never do it. Suicidal empathy is being weaponised and I’m through with it.
This comment perfectly illustrates the mindset folks are talking about. "I'll give when it doesn't hurt me so much" is another form of "I'll give when I have more." It doesn't make the person "bad" or any such thing for not giving, but you won't convince folks to not give by saying "but what about you, don't you want nicer food/clothes/etc."
I live in reality. It's me first, then it's my family and my close friends, and then my local community and then, finally, local charities. That's how my budget works. A budget is money in and money out. And when all of that is good, then maybe I'll think about larger charities where I can't be directly involved to see where my help actually goes.
Most people do think they have less than they really do - which is to say there are families living on less income than they are thus proving it is possible with some luxury quality of life compromises. However that doesn't destroy the point that there are people at or near the bottom who shouldn't be giving.
> give what you can when you can
Probably something like this: https://www.youtube.com/watch?v=6ayPuijerjQ tldr; have your kids split their money into three separate "jars": Spend (can be freely spent), Save (this jar generates interest from the money in it, they also have to wait some time to access the money if they want to spend them) and Give (for charity).
Yes. You can make it a 2% contribution at 17 then add another 2% each year, until you hit say 24% at 29 then keep it there.
Then the habit is set up and you just log in to whatever and up the number.
Get your habit be investing in an education savings account.
I think it's actually a bad thing to think about money early on. Because it adds a layer of responsibility which I think takes away from simply enjoying life and focusing on what you might be truly passionate about.
One of the things I hate about my 30s is that I'm focused on money now and it feels like I'm not living the life that I want. It just feels like I'm preparing for death.
Which I'm not saying isn't the sensible thing to do, there's just something inherently managerial about it which doesn't seem intuitive to living a meaningful life.
The earliest years of your earning life contribute overwhelmingly more to your final retirement figure than your later years. Anyone lucky enough to have a job in their teens that gives them disposable income after each paycheck really, really, really should be saving and investing. Like OP, if I was more serious about investing in my early years, I would be retired by now.
One can lead a meaningful, enjoyable life while also considering their finances.
> The earliest years of your earning life contribute overwhelmingly more to your final retirement figure than your later years.
for most the amount we earn before about 25 is so little that even everything saved at the best return is insignifitant inretirement. at 25 a small percentage of your income saved becomes meaningful, but you are likely to earn enough more at 35 that the amount you can save then totals to more
> One can lead a meaningful, enjoyable life while also considering their finances.
This is where I disagree. I think there's a certain amount of naivety required to pursue meaningful things. There's so much in life that makes no financial sense that creates meaning. The moment you start having to think sensibly from a financial perspective, is when so many of these things no longer make sense.
Once you're plugged into the system there's almost no turning back.
> There's so much in life that makes no financial sense that creates meaning. The moment you start having to think sensibly from a financial perspective, is when so many of these things no longer make sense.
I get the sentiment, but it implies the opposite of your conclusion.
Since so many things make no sense from a financial point of view, the only sensible strategy is to break free of the financial constraints as soon as possible. Money cannot buy you happiness, but it can buy you the freedom to pursue it.
Retire early to give yourself the best cushion (and best possible chance) to pursue meaningful things, without the everlooming sword of making ends meet. The added benefit of life experience to filter out pursuits that only look meaningful on the surface, is a nice side-effect of this strategy.
> Since so many things make no sense from a financial point of view, the only sensible strategy is to break free of the financial constraints as soon as possible. Money cannot buy you happiness, but it can buy you the freedom to pursue it.
So I think the reason why this doesn't make sense (in my mind) is because in a state of retirement i.e. financial independence, you're still just as conscious of money as you were when you were accumulating wealth. You still need to manage money no different to when you were accumulating, it's just now you're not earning.
To me the freedom I'm referring to is similar to that of childhood - where you're not worried/concerned about "the system". You're just doing your own thing in your own world. That kind of purity no amount of money can resolve, even in an early retirement scenario.
The other issue is that a lot of stuff only makes sense when you're younger. Like it's a lot difficult for example to become a travelling musician or even to travel etc.
Now of course, early retirement provides it's own kind of freedom. But I would say that it's not equivalent to the kind of "freedom" that I'm referring to, which is basically being carefree.
> To me the freedom I'm referring to is similar to that of childhood - where you're not worried/concerned about "the system". You're just doing your own thing in your own world. That kind of purity no amount of money can resolve, even in an early retirement scenario.
The only ways you can live as an adult unconcerned about the system is 1. if you actually have a substantial financial backstop (trust fund, wealthy parents, etc.) and just pretend you don't, or 2. if you don't have a financial backstop, at which point "doing your own thing in the world" just means being a vagrant, drifter or bum.
Oh, the FIRE community. If you trained yourself to live looking at the money you need to save to retire, your brain will most likely be wired to that behavior, and breaking free from that will be utterly difficult. On top of that, people with the FIRE mindset have probably by default already a strong (innate? taught?) bias towards enjoying optimizing their life and making it the end goal.
> Oh, the FIRE community.
I think you may be confused, I'm not part of the FIRE community. I'm only taking the statement that "doing meaningful things is not financially sensible" to its logical conclusion, not endorsing any position.
> If you trained yourself to live looking at the money you need to save to retire, your brain will most likely be wired to that behavior, and breaking free from that will be utterly difficult. On top of that, people with the FIRE mindset have probably by default already a strong (innate? taught?) bias towards enjoying optimizing their life and making it the end goal.
So many assumptions and claims without any supporting evidence:
- "FIRE people" train themselves to live looking at money only.
- This wires their brain to that behaviour (left unclear what this actually means in terms of concrete behaviour).
- Breaking free from this behaviour is difficult.
- People with this mindset have a bias towards enjoying optimizing their life, to the point this is their end goal.
- (Implied) This makes their life some combination of sad/bad/meaningless.
I don't really want to even argue against this because the burden of proof for providing any supporting evidence is yours, not mine. I'm not particularly interested in constructing some overarching psychoanalytic theories for a large category of people who I've never even interacted with, but you do you.
Sorry, I wasn't addressing directly at you, even if I was technically answering to you. It was more of an unsolicited rambling about the general topic.
Sorry for that.
> One of the things I hate about my 30s is that I'm focused on money now and it feels like I'm not living the life that I want. It just feels like I'm preparing for death.
FAANG job at 22. Save up 25k a year for 4 years, that is 100k. You'll already retire at 56 with over 1.5M in the bank. It isn't perfect but it is a lot better than what most people do.
Really all you need to do as a programmer is max out 401k and maybe throw another 10k a year into savings on top of that.
I worked at MSFT for a decade and I would have retired at 40 if I hadn't spent 3 years trying to run a startup after my time at Microsoft.
This includes international travel every year, and 2 domestic vacations.
> You'll already retire at 56 with over 1.5M in the bank
That 1.5M isn't inflation adjusted. If there is 0 inflation between now and when you die 1.5M is plenty. However the more inflation there is between now and when you die the more money you will need, the later you need to retire, or the less spending money you have. (of course we need to asking how things like social security fits into your plans as well, but this is already complex enough).
If you 22 and used to a FAANG income even with saving $25k/year every year you need more than 3M to retire retire without losing quality of life (even though most of that is luxury).
Are you willing to live on less, or will you discover with your free time you want to spend more money (hobby supplies? Now you have time to travel - maybe first class). I can't answer this question for you, but you need to think about it. Worse, your answer is likely to change over time.
>Investing for retirement at 17 is a bad idea! At 17 you should still be thinking about investing in education
Why would you assume they are mutually exclusive? You can just do both.
And poor people just should eat cake, I know..
For real, I believe most 17 year olds on this earth do not have the funds to invest in education AND in a retirement fond, so there are choices to be made. (there are also the choices of creating social bonds and investing into activities together, ...)
The root comment was talking about investing 5% of their earnings. If you're making any kind of income at 17 (which admittedly is not everybody) then learning to save+invest a small portion of that can have incredible positive snowball effects beyond the compounding itself.
I can't imagine a scenario where at 55 years old, you would miss the 5% of your summer income you invested back in high school. But I can totally see a scenario where investing those 5% led you to increasing it to 10% in college, 20% on your first job, and being financially independent way before you hit the age of 55.
"I can't imagine a scenario where at 55 years old, you would miss the 5% of your summer income you invested back in high school."
If those 5% were the question of whether to go with the group on a adventure together or not - and you end up alone at 55 years and not invited .. you might have rather invested different back then. But on the other hand I don't think those 5% of earnings with 17 make a difference later.
The only real difference they can make, if they made you start a habit of saving income for important purchases. (But not really fore retirement at that age. But each to his own)
I think this really comes down to how a teenager is wired and life circumstances. Some of us made all our close friends in college and dont even live near our hometowns anymore. My high school friendships are all “dead” so to speak.
I think if a teenager is the social type, or they have a positive (non-toxic) friend group, then absolutely - spend the money! It’s an investment in your friends that may or more not pay off.
But some teenagers don’t have much in common with their peers, are bullied in high school, or just want to move on to the “real world” and graduate already. For those kids, invest!
"or just want to move on to the “real world” and graduate already. For those kids, invest!"
In general sure, it really depends .. so invest in what? It can mean many things, like also saving for the drivers licence/first car to make that move away into a nicer worlds with better opportunities.
absolutely! It’s always a good idea to write down your life goals and major planned expenses. Then you can prioritize them as needed.
That usually helps answer questions like “if i invest X% of each paycheck into an S&P500 index fund, and put the remainder toward saving for my 1st car, i’ll have money for the car by date Y.”
And this skill translates to adult life really well. I find myself doing just that a couple times a year! Of course for some teenagers investing a substantial amount is simply not realistic…not every family is middle class after all.
One important reminder: inflation is no joke these days. I’d only recommend a savings account to a teenager for short term goals. Even if they are poor.
Most 17 year olds have very low income and education goals. They will miss that 5% in a retirement fund because they are forced to take a student loan to cover that.
Forgive my puzzlement, as I come from a country where you would not consider taking a student loan (if this even existed) to cover the $50 you put into an ETF from your summer job.
Eventually you just don't have enough. If are short $50 where does it come from?
> I believe most 17 year olds on this earth do not have the funds to invest in education AND in a retirement fond
There is also a huge overlap between "kids who have wealthy parents" and "kids who can afford to invest".
Im not claiming everyone can do it. Im saying they are not mutually exclusive. If they were mutually exclusive that would imply no one could do both. For those that have to chose one or the other I agree they should choose education, but thats a subset of cases.
It seems like learning about personal finance is itself educational, and there are a lot of jobs where you deal with money. So this isn't entirely separate from investing in education, depending on which kind of education you mean.
As with many times when we use the word "should" (and you've used it a lot), the perspective you're sharing is deeply influenced by your own cultural background and might not apply to many people reading.
A few examples: school loans, considering a house purchase to be a sound investment, purchasing once-in-a-lifetime household items, saving for a wedding (from the age of 17!?) or marriage (not sure what you even mean by that if you don't mean the wedding itself?).
The details matter and are personal I agree.
Even if a house isn't right for you, you still need to save for the deposit on an apartment. You still need to buy furnishings for your apartment. You won't even know if a house is right for you until you are mid 20s to 30, so it is probably best to save for a house and if you decide at 30 it isn't right for you roll that money into retirement savings (if a house isn't right for you that means you need more retirement savings)
Relationships - even if you don't have a wedding or kids - come at the time you have those starting to get out on your own expenses. You will need to figure those out.
You just replaced "buying a house" with "buying an apartment", proving my point about cultural bias :-)
I meant, for many people (especially young ones), taking that same deposit to purchase an investment property (which could be a house or apartment, but has a tenant who lives there rather than being for oneself) can be a better deal than buying for themselves.
In the end, buying a place to live in is very much an emotional choice, which is totally valid. But in some locales and for some lifestyles, being a landlord who pays rent elsewhere can be a better financial decision.
This kind of advice was gospel in the 90s.
[should, shouldn't, supposed to, never, always]
These are key words to mentally breakpoint on and more carefully consider what is being said.
What educational path is safe to invest in right now?
What kind of job will be in high demand in a few years and will remain in demand for at least 20 years?
I'd offer learning skills, personal finance and other life skills, (more or less public) speaking, potentially languages and (modest) mathematics as some examples of skills that will probably be useful for any foreseeable future including most dystopias. Particularly they are things that many 17 year olds will be lacking.
> At 17 you should still be thinking about investing in education
I mean, sure, in a perfect world you can postpone retirement savings. But if we're doing perfect world, you shouldn't have to think about "investing in education", your government should have the basic cognitive skills that would let it recognize that they should invest in education - ROI is pretty spectacular.
Realistically, both, because... otherwise you just pick how screwed you'll be later in life.
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Sometimes I feel like I started investing late at 26. Already, six years into the best decade for compounding in your life. But such was the power of compounding that I had reached a substantial net worth by age 35. So even just nine years can make such a tremendous difference even into later ages. It's never too late to sock money away.
It remains to be seen what's going to happen over the next few decades. It's entirely possible that it'll all get wiped out (the substantial gains, not all value).
While the market was a very good bet for the last 50yrs, its not a guarantee.
Especially in the current climate you should be fully aware that it's significantly more risky to start investing today vs 10 yrs ago.
(Riskier doesn't mean it's necessarily a bad idea. It should just be a conscious decision under the acknowledgement that the upward trajectory is not certain. Especially in current political climate - and that "hodl"-ing doesn't necessarily mean you'll eventually get back what you invested, if a downturn manifests)
>> Especially in the current climate you should be fully aware that it's significantly more risky to start investing today vs 10 yrs ago.
First, I don't think this absolute statement is true; I think you need to look at it from the alternatives perspective. If not investing then what? bury gold? spend it all?
Second, are we at a much riskier time than past history, both short & long term? I made significant contributions in 2014, saw 30%+ wiped out within 6 months and seen it all come back and more with the power of long timeframes.
Third, investment can take a lot of forms, not just today's hot tech stocks. I won't get into it beyond the standard think long term and avoid leverage, which seems to be completely inline with start early; start now.
Your money has to go somewhere or it will rot to inflation. If you're ultrabearish on stocks, snap up bonds. If you're bearish on stocks and bonds alike, snap up gold. Either way, bare minimum of what to do with your money long term is to preserve its value across inflation.
But really I would recommend nonetheless staying the course with investment advice on a stocks/bonds balance relative to your age. Increasingly, the economy distributes not through labour but through capital and holding stocks is essential even with their inherent risks. Even in light of that CNN article about meme stock and crypto investors having the last laugh over the past decade, indices of ordinary large-cap stocks bring you exposure to these things.
> Your money has to go somewhere or it will rot to inflation.
Inflation is mainly created by this act of "putting your money somewhere". For most people, this "somewhere" means loans. Money is being loaned out to people, spent, deposited back into the bank, and loaned out again, on and on it goes until $1,000 turns into $100,000 in circulation, not a cent of it real until all loans are paid back.
You are very confidently incorrect. So incorrect, it is hard to even start correcting you.
* Inflation is not caused by "putting your money somewhere" What on earth. * At a high level, inflation is caused by either "too much money chasing too few goods" and/or the cost of producing the goods rising. Money supply can increase without causing inflation if the supply of goods can also increase. In short, the supply of money can increase without causing inflation if productivity rises to match it. * Most people do not "put money" in loans what are you even talking about there? * Bank loans do not automatically increase the supply of money. When a loan is taken out, it is (mostly) deposited to another bank, resulting in a net-zero change in money. Increasing the supply of money requires the federal reserve to take steps.
> In short, the supply of money can increase without causing inflation if productivity rises to match it.
You're actually agreeing with me. Money supply must be backed up by real wealth and production.
That's not how things work in current times. We have nearly zero interest rates, and currencies are backed up by literally nothing.
> Most people do not "put money" in loans what are you even talking about there?
Fractional reserve banking. Banks loan out the cash you deposit. They "efficiently allocate" the money in their custody.
> Inflation is not caused by "putting your money somewhere" What on earth.
It absolutely is. Banks can easily turn thousands of dollars into hundreds of thousands of dollars by repeatedly loaning out the exact same dollars numerous times.
It's some kind of society wide financial call stack. Too many defaults and everything starts unwinding.
> Bank loans do not automatically increase the supply of money.
Obviously they do.
Imagine you deposit $100 at your bank. It takes your $100 and loans out $90 of it to someone else. There are now $190 dollars in circulation.
Whoever took the loan goes off and spends it. Eventually it gets deposited back into a bank. Then the bank loans out $81 out of that $90. There are now $271 dollars in circulation.
And it keeps going.
You can inflate bitcoin via this algorithm.
> When a loan is taken out, it is (mostly) deposited to another bank
Irrelevant. Banks form interconnected systems. They all settle debts and accounts with each other.
> Increasing the supply of money requires the federal reserve to take steps.
The physical supply of money is irrelevant. It contributes only a small fraction of the circulating money supply. Money is numbers in bank databases now. They could run the money printers 24/7 and they'd never even come close to catching up to the inflation caused by banks.
There is never a guarantee, but all I can say is that there have been people claiming we're in a bubble for over a decade now. Maybe we are, but that doesn't mean you shouldn't be investing instead of spending all of your money.
Saving is follows the same advice as for planting a tree.
The best time to plant a tree is ten years ago.
The second best time is now.
Historically, it takes about 7-10 years to double your money in the stock market. So between doubling your money and incremental saving, yeah you should see a pretty significant difference from 26-35. And that's before it skyrockets :)
I didn't start til 35 so don't feel too bad.
I started my daughter investing with a custodial account at 13. She put a few hundred dollars of her money in and I convinced her by matching her investment and told her if the amount ever went below the original investment I would backstop any loss.
Investing is all about that long term gain and slow growth. Having 10 years of experience after finishing college will do so much more than Robinhood for refrigerators.
I've made a similar deal with my kids: Around 7 years ago I set up a "kid retirement" plan for them, where they couldn't touch the money until they were 18, but any money they put in I would match, and I'd also give them 10% APY with monthly compounding. My daughter aged out of it a couple years ago, she got something in the $100 range. Her brother still has a 18 months left, and I just recently rolled his over into the custodial account, he's got over a grand in there currently.
My daughter I just recently set up a ROTH for her and told her I'd match anything she puts into it, and stressed she should put something into it now from her savings, and then put some of her paycheck into it, anything is better than nothing. So far she's declined the free money. I'm going to set one up for my son, once he's at the point of having an income to justify it. She's very smart, but in some ways she's very stupid.
That young you should be investing in a 527 education account not a ROTH retirement account. Education is a much better ROI when you are young than anything else. As you get older the value of education decreases. In generally the cross over is sometime in your early/mid 20s (Could be as young as 16 if you don't do well in school, or as old as 35 for things like medical doctor)
If you don't live in the US you will have different options, but the idea still applies
I'm doing a 529 as well as wanting to set up the ROTH Note that you can also just take money from your other investments, deposit it into a 529, and then immediately pay yourself back for educational expenses you've paid for off the 529.
My kids have some 529 buffer, and we are paying for my daughter's school right now (though she's paid us back for the class she got an F in). My son, it's not clear that the typical school track is going to be the right thing for him, but we also have a 529 for him that I've been contributing to.
You mean a 529 account right? 527 seems to be associated with political contributions. I looked it up to ensure I wasn't missing out on something I did not know about...
Too late to edit, but I stand corrected
The spiraling price of college in the US today has been questioning the assumption that education has a better ROI.
There are a lot of it depends. If you are going to be a retail worker all your life there is no reason to go to college. A music degree has questionable value on its own, but many people get them understanding that "any degree" is needed for some good jobs and those that find those do well enough (your generals and non-major electives are important). The school matters - Harvard is expensive but the networking can be worth it if you network well in school. State schools tend to be a lot cheaper than private or out of state as well, and generally pretty good. Scholarships enter in as well. Degrees like Engineering or Medical doctor tend to have a much better ROI long term, but only if you pick the right one and pass.
But you need to make your own decisions. For some your best ROI is dropping out of school at 16 - but for the vast majority more school will be worth it.
This would be fun to model. Lifetime earnings are higher for those who have more education, but there's potentially decades of servicing a potential mountain of non-dischargeable debt to consider (potentially decreasing post-college investment ability) too.
I don't know the first thing about student loans (interest rates, amortization periods). I never had one. I just search-engined 2025 federal student loan rates and I'm blown away by the interest rates. It looks like avoiding student loans at all costs is the way to go.
I wonder if spending a few years working (especially if your parents are able to continue to house you and pay for health insurance) and contributing to a 529 plan might meaningfully decrease the overall cost, albeit at the "penalty" of starting college later in life (at, say, 22 instead of 18).
I take that even a little farther. Whatever my kids make (up to the Roth limit), I give them money to put into a Roth IRA [and they can keep what they earned].
That maximizes what they (as teenagers) can put into retirement accounts, their tax rate is 0% now, and though it doesn't teach them the deferred gratification aspect, it gets their retirement savings started.
We can talk about the deferred gratification aspect in other ways and/or later, but I'd rather they get 40-60 years of tax-free growth.
Is your daughter feasibly going to make “real money” in the future? I personally look back on working a job in college as a waste of time and attempting to save money then as a waste of effort. Should have just taken more debt, the amount I did take turned out to be trivial to pay off and double or triple wouldn’t have been that bad. I feel like there are two worlds employment wise, and some advice leaks between them which ends up being maladaptive in its new environment.
I hope that @roberdam reads this and implements those into his PWA.
OP, enabling: - deposits (and withdrawals) - a matching logic (which we can do manually I guess, by doubling the deposit amount) - and correct calculation of compounding (if I had $100 for 11 months and add $100 in december, I shouldn't see the value compound $200 for the whole year)
would be great.
Bonus points if there was some kind of password (even hardcoded) so that the kids can't just click the gear icon and write themselves a blank check of $1,000,000
Excellent suggestions! For now, what I do is update the amount every time there's a deposit or withdrawal, and I set the initial date to the day of the withdrawal or deposit.
Ah, she's barely out of her teens, give her a break :) Better things to spend one's life on in those years than worrying over a few hundred bucks in a bank account. She'll come back around in a few years.
My dad made a deal with me that, of doubling what I would save during the week.
You say that now but as a young person with a decent income and no family or many responsibilities it's hard to even know where to start.
And I'm not even talking about what to invest in, I'm already confused at which platform/bank/whatever to do it through. The "meta", if you will. I just want to invest the 70% of my salary I don't need every month and not think about it for 40 years but how? Maybe an important detail, I'm from Switzerland, perhaps it's easier in the US with things like Vanguard.
Don't know about Switzerland, but most US brokers offer some kind of "target retirement date" fund, which automatically shifts from higher-risk assets to lower-risk as you approach retirement. VFIFX is one from Vanguard, for example. Pick one you like (just ask a coworker what they use, if you pick a big-name brokerage it really doesn't matter which one), shove your extra cash into it regularly, and forget about it. Then cross your fingers the market isn't actively crashing when you plan to retire (this is unlikely, but it does happen a couple times per century).
If you start to get into truly high wealth amounts (USD$500K+) you might consider hiring a wealth advisor, who can probably do better even after accounting for their fees.
> If you start to get into truly high wealth amounts (USD$500K+) you might consider hiring a wealth advisor
That's not nearly high enough for a "wealth advisor". Maybe a fee-only financial planner, but even then it's borderline.
Even when it crashes it's like 20% no? It's not actually that big of a deal.
The idea is that over a 40 year window that 20% (or more) crash is eventually going to rebound, so just sitting on the target retirement fund is going to do well over it's lifetime. As you get closer to retirement, and don't have the time to recover from the crash, the plan moves to safer investments.
Crashes can be a lot bigger than just 20%.
I’m sorry but 20% of a retirement fund is a lot of money.
It may be a lot of money but it shouldn't matter because you don't need all of it right away.
My understanding is that, if the market generally continues on the rate of return it's averaged throughout its history (that is, if you're not a doomer), then the single most important thing is showing up to play.
People who try to time the market or wait for a perfect time or pick the exact right blend of stocks, on average, don't do as well as people who pick a boring index or mutual fund and forget about it for 40 years.
> People who try to time the market
If you have doubts about the long-term __existence__ of the market, then investing in the first place necessitates "timing the market" since you'll need to determine when to sell before the panic sell-off which inevitably comes before the global minimum is reached.
Mind you, I'm not talking about figuring out whether or not to "hodl" through local minima. I'm talking about rolling into a different store of value (e.g., cattle, crops, ammunition) before the whole thing goes up in smoke.
If it goes up in smoke, you personally can't ever buy enough ammunition to matter. Who's gonna man all those guns?
This depends heavily on geolocation. Experiencing economic collapse in the Montana wildnerness would be very different from experiencing it in Washington DC.
I wasn't thinking of fighting off hordes or anything like that.
Ammunition can be used for barter, hunting, and self-defense. It can also be used as a tool to break locks, start fires, and send signals.
Yes, however: My father in law gave me some great advice: Pick a stock or two and put some small amount of your investments into it, like 1-5%. This makes the investing more fun. And he was very right, not the least of which because the stock I put $7K in exploded and ended up worth over $200K. ;-)
My BIL put money into Underarmor (he's an outdoors guy) and Electronic Arts (he's also a gamer), both of which have done good for him. My son put some money into Roblox (he's a gamer), and that's done well also.
Read "The Four Pillars of Investing". Basically index funds, diverse whole markets, leave it alone and watch it grow.
I did this at 22, and that seed money has grown a ton.
All the choices you have to make can be very daunting. I was very lucky to have a colleague at work who gave a talk at the right time in my life with some plausibly right choices.
In the UK I started out using https://www.charles-stanley-direct.co.uk/ and later moved to https://www.ii.co.uk/. I initially invested in https://www.vanguardinvestor.co.uk/investments/vanguard-life... which is a fund which is available on a bunch of platforms. These days I recommend https://www.vanguardinvestor.co.uk/ to some people as an easy and low fee way of getting started with Vanguard funds in the UK.
I don't know what the best trading platform options are in Switzerland - it looks like all of the ones I'm familiar with are not relevant to you.
The key thing is you want to minimise two types of fees: * Platform fees * Product fees
For example Charles Stanley Direct charge 0.3% platform fees, and https://www.vanguardinvestor.co.uk/ charges 0.15% platform fees.
Vanguard LifeStrategy® 100% Equity Fund charges 0.22%.
The bottom line is that there are lots of good choices, and the main thing is to make a choice and get started. You can always optimise/improve your choices later.
I'm also in Switzerland, currently my approach is to invest in Vanguard VOO (tracks the S&P500) via Interactive Brokers. There is a way to setup auto transfer and invest every month
As a caveat your money will be in dollars and in American companies, which might not be what you want, but it's worked for me well so far
Are you saving for retirement or buying property? Then start filling your 3rd pillar (Säule 3a) first because of the tax cut. Ideally in a low cost provider (viac/finpension), but the bank you already have probably has an offer too. It might be a bit more expensive than viac, but still much better than not investing. Stay away from 3rd pillar at insurance companies, they might be hard to cancel. Do yourself a favor and do this just for the tax cut.
If you max out the 3a, you can start of thinking investing elsewhere. IBKR is the cheapest to buy a US domiciled world ETF. But the UX is not super easy and you will have to fill all transactions manually in the tax report.
Neon with investments is another option I can recommend if you prefer a swiss company and a simple user interface. Fees are low if you set up a savings plan and pick one of the 0% ETFs
Thank you, that seems like reasonable advice!
Your bank probably has an investment platform, you can just use it, it doesn't matter. My portfolio is 70% XEQT 30% CASH.TO—don't bother with anything else.
Oh, that can be bad advice. It does matter a lot if the bank asks for high fees, which would be the case with all(?) German banks, and I'd be surprised if that's different in Switzerland.
Banks don't typically charge any fees for a self-directed account that holds primarily ETFs, beyond maybe a small trade fee or account fee(?) - which we would never pay in North America. Active management of either your account or the products you hold is where they stick it to you. Each product will have a management fee which you should check, but you'll likely avoid the big bank and insurance company products because they do no better than the market funds and take more in fees so the returns suck.
My bank also charges a trade fee which I think is bullshit, but at least it's a major bank. It's like $10 so doesn't matter all that much, not sure how much it would be for Switzerland, but you could just buy the stocks in larger batches if trades are expensive.
With the amount people usually trade $10 is a huge percentage. When you factor that in with the missed compound interest of that money you usually lose tens of thousands of dollars until retirement, likely more.
There is no need for a big bank here, in Europe. If one of those regulated companies goes bankrupt the etf is still yours and transferable to a different institution.
War in Europe is the remaining risk factor, but if that happens it won't matter anyway.
Not sure how it's like over in EU, but in Canada, at this point, I assume all fin tech startups are scam. Neo financial and wealth simple are definitely fucking scam. Major banks may suck but at least you get what you pay for.
Curious about your opinions on WealthSimple, if you can share. I got introduced to them when they bought out SimpleTax, and so far they've been pretty reasonable for investments.
They require a paid subscription to use USD. They claim to have customer support, but the button isn't actually working, it does nothing. At least they respond by email. That's all I found so far, but I haven't actually made any trades yet.
$10 may not feel like much, but it's the proportional costs that you have to figure out.
If that's e.g. for a monthly $1000 investment, it means 1% of your savings is lost in fees each time. That'll be 1% that's not going into savings. If you end up with a million by some time, that small fee will have cost you 1% of that, which is $10k.
"It's just a cup of coffee" -> "that's a 10 000$ cup of coffee". But if you only save 200 a month, that 5% is 200k you've lost by the end.
One percent is often considered a reasonable cost ratio, but it's definitely worth considering what the real numbers are for a given option.
- Your bank's platform will cost an arm and a leg; Interactive Brokers or Degiro are both available in Switzerland and you will save so much on fees (especially if you only buy and hold ETFs of which Degiro offers many with 0% fees) that it's the equivalent of faster returns on your money.
- There are many "getting started" guides available, I found Mister Money Mustache the most straightforward to my liking, but you're golden as long as you understand a couple of basics: 1. investing a high% of your income is more important than chasing returns (you seem to be there already), 2. don't trade, just buy the whole market (you mentioned Vanguard, they offer a "total market" ETF), 3. look for the lowest fees as long as you hold title to your shares (IB and Degiro do this ; eToro does not so if they sink, you're SOL), 4. don't time the market, just buy now and sit on it as it grows
For the plattforms, that also blocked me for a while. But it is easy now. You just get one account at a platform that offers a free broker account and supports buying the etf you want without extra fees.
Typical options in Europe: Trade Republic, scalable, Consors Bank.
Then the usual: Around 10K where you can access it directly, a small amount in an investment with percentage (scalable and trade republic both offer that, limit there is or was 50k), rest in one broad ETF like one that follows the FTSE all world (vanguard or invesco offer that, one is bigger, the other asks for less fees).
No affiliation, and I dont know whether being outside of the EU changes things. And yes, there is the risk that we are in a huge bubble now and it popping would at first significantly lower the money put into the etf. But you certainly do have access to vanguard etc.
Have a look now and at the latest this weekend you have this solved, hopefully forever.
Same. But is same for most people. Average American retirement savings is like $200k. I've done better that that but not by orders of magnitude.
About six years ago I was hired to make an investment simulator. I wish someone had show the results to me when I was a teen. I did show it to my daughter at the time (she was in college), and used it to explain the power of compounding interest.
I found they still an old preview online (sorry not https)
http://simulators.gibsoncapital.com/new-preview-for-total-si...
> There's an awful lot of negativity here, but as someone who's 55 and has earned a good wage since I was 17, I really wish I had taken investing more seriously from the very beginning. While I knew of compound interest, I really didn't understand it until like a decade ago. If I'd started putting 5% of my money into a target retirement plan from 17, I'd be retired now. As it is I'm not doing badly, but I really wish I'd started earlier.
I'm 55, too. If I'd started studying HTML, CSS, JavaScript, Python, and Rust at 17, I'd be retired now. Waitaminnit....
Sarcasm aside, target retirement plans wouldn't come along for decades. Investing was very, very different when we were 17. And many of the people who were 55 when we were 17 had just lost a terrifying amount of their life's savings in a stock market crash that made Taleb rich because he'd bet against the market.
It seems extraordinarily unlikely that a 17-year-old today should do exactly what we wish we could have done when we were 17. About the best they can do is follow advice that's now centuries old: make friends, learn skills, live below their means, and, maybe, earn credentials.
That's why you shouldn't leave it up to a kid with very little money who quite literally cannot understand the long term impacts of their decisions to invest or not. Instead, put aside something for them. You can even start well before they are 17.
Naw, dawg, Imma try and try to encourage them to get started early and put a little bit away, because it's good for them. I'm acutely afraid of a scenario where they have bad habits and anything I leave them they flush down the toilet because of those bad habits. I'm hoping to leave them plenty, but they need to be in a position to not waste that for it to be worth anything.
Yeah you can do that. Doesn't prevent you from setting something aside for them and giving it to them if and when there is a good time.
With the way housing prices are, it doesn't seem like I have an option NOT to. ;-/
Thanks for your encouragement!. I started investing in my mid-30s, and compound interest really works wonders after a while. I hope my kids do better than me, though.
Please share https://www.bogleheads.org/wiki/Getting_started with your son.
great resource, thanks for sharing!
> and let him pick a couple stocks to put some money into
And yet we complain that corps today are too focused on their market valuation over everything else; customer experience, longevity, worker conditions, R&D are all being neglected in order to make the needle go up.
'Investing' in stocks in order to flip them when the price goes up is feeding this insanity. Teaching kids that this is perfectly rational seems selfish and short-sighted.
Our children should be encouraged to invest into something like bonds which actually help promote economic growth.
Teaching children to invest in bonds is spectacularly bad asset allocation. Investing in stocks or bonds both help promote economic growth.
For me, the notion of teaching kids to invest in some company they know (Disney, McDonalds, Coke, Apple, or whatever) and telling them that they are buying a tiny, tiny share of the company is an important mental model to help shape in them.
Stock picking and speculation especially with a single company is indeed a spectacularly bad strategy, but it can be a motivating start.
A well diversified fund would be the better alternative if you need to aim at a single thing. But it's hard to say what's the better first step if you're trying to teach personal finance management.
Investing in stocks and bonds both helps promote economic growth.
Corps have always been focused on their market valuation. It's up to society, and the laws it passes, to change their incentives.
Bonds returns don't match inflation so long term you're loosing money to inflation, it might be better to spend it
Actively invested retirement funds throughout 30+ years can also catch more concentrated moves if you are educated on a sector. For example, choosing the mag7 in the early 2010s vs just the SPY. Following the market could also let you pull out during serious world events.
There is definitely money left on the table when you ignore the market, even in a retirement fund.
And be the richest man in the cemetery?
Retirement is not mentioned in the post
It is one of the most common reasons people invest though so it's entirely relevant
I don't think you need a reason to invest. You should be making more money than you spend, so you might as well put the surplus to work.
Be careful here. You should have some "rainy day" savings. You should have some retirement plans. You can save for big items like a vacation.
However you don't know how long you will live. Don't be a miser who spends nothing. If you have surplus after the above you should either spend it or donate to charity.
Okay
I said that because I find it puzzling when asked the reason why I invest. They're like, are you saving for a house? No, I'm saving in general, and then I buy whatever I want.
Nobody here asked you anything
I put my thoughts out here for others to see and comment if they wish.