Big Money Savings?

[nb247]

HI, im currently 15 years old and am looking to make a couple thousand dollars this summer with a job. I have a couple thousand dollars in the bank in a basic savings account. I have seen some things with Dave Ramsey and the advantages of starting some accounts early due to compound interest. So, my quesiton is what do u think i should invest my money in that will get me started and build wealth later on in life.
Thanks in advance

[Mr Nice Guy]

Young buck, if you keep this attitude going through high school you will be a star...

[disneysteve]

Welcome. You've got a great attitude and will certainly go far in life.

What should you do with the money? That depends on what it is needed for and when. Will you be wanting to buy a first car in a couple of years? Will you need the money for college? If the money is for short-term purposes like that (under 5 years), keep it safe in a money market account or CD.

If you want to invest this money for a somewhat longer term, like over 5 years but not for retirement, look into a good growth stock mutual fund. I'd recommend an index fund like Vanguard's Total Stock Market Index or something like that.

If you want to get a jump on funding your retirement, as long as you have earned income, you can open a Roth IRA. That can be done with a discount broker (Scottrade, E-Trade, Schwab) or a mutual fund company (Vanguard, Fidelity, T. Rowe Price). Invest in low cost, no-load mutual funds like the index fund I mentioned or go with commission-free ETFs.

[couchrobt]

Keep that attitude as long as you can. It will be very useful for you at work and in life. Especially when you are starting to get things/dreams come true.

[nb247]

Im saving for more the intermediate-long term, likely over 5 years. Thanks for the suggestions i will look into them.

[disneysteve]

Originally Posted by nb247

Im saving for more the intermediate-long term, likely over 5 years. Thanks for the suggestions i will look into them.

In that case, I'd go with diversified mutual funds as I mentioned above.

[nb247]

So would an index fund be the best choice? and where should i look for the best one or is Vanguards the best?

[disneysteve]

Originally Posted by nb247

So would an index fund be the best choice? and where should i look for the best one or is Vanguards the best?

I think for someone just starting out, or even someone well established, an index fund is a great choice. You get instant diversification at low cost.

I'm personally partial to Vanguard and have a substantial amount invested with them. For you, however, they may not be the best choice as their funds generally have a $3,000 minimum to invest. You're probably going to want to go with a company with a lower entry fee. I believe T. Rowe Price may have lower minimums but I'm not sure. Another good option would be Schwab or Scottrade, both of which offer commission-free ETFs so you can buy whatever youc an afford at the moment, even if it is only a few shares, and you can add to your holdings over time as your income permits.

[jpg7n16]

Same goes for Fidelity. They have commission free trades on some index ETFs, and can open with $2500 (similar to Vanguard). DS uses Vanguard, I use Fidelity, others use other companies. What really matters is you find a company that works for you.

iShares ETFs by Category at Fidelity ; Fidelity Investments

I know at Fidelity - you just have to deposit $2500 to open it, but you don't necessarily have to invest all $2500 in your mutual fund choice. You could let a portion sit in cash if you just wanted to invest a smaller portion of your money. (ie. open with a $2500 deposit, but only invest $1000, keeping 1500 in cash) Vanguard is probably the same - so if you really like Vanguard, don't necessarily rule it out based on the minimum deposit.

[jpg7n16]

Wow sorry totally forgot something - you're a minor! You can't open a brokerage account. Oops!

You would have to get your parent/guardian to open the account for you, and then they would be in charge of managing it. You can't really do anything on the account until you're of age (usually 18, but it varies by state).

[nb247]

Thanks for all the suggestions! and yes my parents would have to open it and manage it for me

[Mr Nice Guy]

Just a quick story for you.....

Right after high school, when I was 18, I went to Mexico with a seven other friends for our "senior trip." This was my graduation present. It was for a pretty good deal (about $800, all inclusive,because of the bulk deal), and I had a blast.

I have a friend who is a couple years younger than I. When he was 18, his parents gave him $750 in Apple stock, for his graduation present. His money has more than tripled since then.

Who is better off now?

[gf1723]

I have a friend who is a couple years younger than I. When he was 18, his parents gave him $750 in Apple stock, for his graduation present. His money has more than tripled since then.

Wow now that would be an awesome gift!

[nb247]

I hate to sound stupid but i guess thats why this forum is here but ive searched around online and im somewhat confused about the differences between the Vanguard Total MArket index fund and the vanguard total market ETF.

[jpg7n16]

Originally Posted by nb247

I hate to sound stupid but i guess thats why this forum is here but ive searched around online and im somewhat confused about the differences between the Vanguard Total MArket index fund and the vanguard total market ETF.

You just gotta know what to Google

Google: what is the difference between an index fund and an exchange traded fund

First result from Investopedia:
ETFs Vs Index Funds: Quantifying The Differences

Just a side note: An index fund and an index ETF will have identical portfolios (since they track the same index) - the difference is only in the fees.

[Frugal]

It is good that at 15 you are already thinking of the long-term impact of saving money. One of the best things you could probably do at your age is simply to start with a savings account. Try to get one with 2-3% interest rates (I have one...it is like a deluxe checking account that has certain easy conditions you must meet to earn that higher interest rate). Some months, I was able to get really high dividends, compared to the cents you can get in other accounts.

If you can keep working each summer during high school, and consistently, it will really help build your savings bottom line. Some kids can handle a part-time job during the school year, but personally, I think it is best to focus on your studies, if you want to get into a good college (I only worked in the summers at real jobs...did some yard work during the school year for neighbors).

If I were you, I would start learning to use coupons and rebates to save money. I started using them about at your age. You are never too young to start saving money, and the BEST age to start at is in your teen years, not later like some of us do!!

p.s. - You might want to definitely consult with your parents or other adult about investment options. It is difficult enough for most adults to figure out, much less someone just starting out!