Saving Money - 16 Year Old

**ecoadapt** · 03-18-2012, 06:47 PM

It's never wrong to start saving at young age, it's a good practice since you are young and so you have more time. More time means More savings!

I would say, put it 50% for savings and divide the other 50% to others such as those spending,hobbies,etc!

**kork13** · 03-18-2012, 06:49 PM

Cole,
Around here, you're only going to get cheered on. It's outstanding that you want to start saving while you're still a teenager... Many adults in their 30's, 40's, and 50's still haven't it out. It reflects a level of maturity and responsibility that is admirable in someone so young.

Given your current situation, where you probably have no regular (recurring) expenses (except perhaps gas for the car and a cell phone), you could probably safely save at least half of your bi-weekly pay. Right now, how much you save really just depends more on how much you want to spend. Decide now how much spending money you want each month ($100/mo, $150/mo, whatever), then save the rest. At a minimum, you should save at least 20% of your income. But if you can save more, that's always good.

You might consider doing something a little more with your money than stuffing it in your drawer, however. Check out a local credit union or bank, and open up a savings account. You won't make alot of money in interest, but it'll be safer than if you've got a couple thousand dollars just sitting in your bedroom in cash. On the far end of the spectrum, if you want to start learning more advanced aspects of money management, you could even talk to your parents about starting a college fund (529 plan) or retirement account (Roth IRA) for yourself.

Keep asking questions, and learn everything you can. Starting young like you are will set you up really well for your future.

**jddungan11** · 03-19-2012, 05:19 AM

It is never to young to save. Take it from a guy who built a life, lost it, and rebuilt it... discipline in saving is what makes the difference between the people in college and after who are ALWAYS broke and the ones who maybe are not "rolling in it" but they do not have to wonder how they will pay their rent.

Dave Ramsey says "cash is king" and I say, "people who save money, they are the gods."

**MonkeyMama** · 03-19-2012, 05:32 AM

Personally, I'd save everything I didn't need. My savings rate was probably 90% at your age (because I had no needs to speak of - maybe 10% for fun). It can really make *all* the difference when you start out as an adult - both my husband and I were the same way, though we met much later. The first year I worked, about 90% of my paycheck went to pay for my first car. After that, to savings.

I would also open a savings account. Interest rates are not great right now, but there is a level of security there, especially if you start saving consistently. (Even a smaller percentage will grow over time - you'll want to keep it in a bank or credit union).

**NetSkyBlue** · 03-19-2012, 08:04 AM

Here's the advice I wish I'd been given (and taken) when I was your age:

Save AT LEAST half of your take-home pay. Put half of that into a savings account somewhere. (Please don�t keep your savings in your house � it could so easily be stolen by a robber or even an unscrupulous �friend� that happens upon it) Put the other half into a ROTH IRA. Hopefully, you have parents who are on the same financial page as you, otherwise you may have to wait until you are 18 to open one, if you haven�t got their consent.

It makes me sad to think how early I would be able to retire if only I�d started a retirement account so young!

Keep sticking half your take-home pay in the savings account until you reach an amount that you feel comfortable with. Right now, you may feel �secure� with as little as $500 - $1000 saved. There�s not a whole lot at age 16 that you need emergency money for.

As you get older, you may want to save for a car, then car repairs, then a home downpayment, then for home repairs, etc. So your �goal� savings amount will change over time.

Once you reach your goal in savings, put the full 50% of your take-home pay in the ROTH IRA. As your goal savings amount changes, you may decrease what you are putting in the ROTH, but try to never put less than 15% of your take-home pay in there.

**snafu** · 03-19-2012, 02:32 PM

Cole, good on you for thinking about how to use earnings effectively. I too encourage you to open a savings a/c at a Credit Union since banks often have fees and a/c charges. You can likely ask for direct deposit and merely withdraw a set sum for weekly fun money.

It helps to have a goal for savings. What interests you? Save for smaller goals like smart phone, iPad, school trip or? Larger goals like college costs, buy and operate a car?

Hope you'll keep posting and learn effective money management

**jadet** · 03-19-2012, 03:21 PM

Originally posted by ColeMayfield View Post

Well,

The title of this Post pretty well says it all...

I'm 16, just got my first part time job, and well, I guess you can say now that it is my time being spent to make the money, I have realized I don't like blowing it... I'd rather hold on to it and keep it...

I'm looking for a little advice on how much to take out every month... It is currently just a part time job, so I am not making a ton of money, but I figure it is never to early to start...

Basically, What I am asking is, say I make 200 bucks every 2 weeks (400 a month)... What percents should I withdraw?

Savings - (Money just to have in Cash, at home in a Drawer): ___?___ %
Spending Money - (Money Basically to just have in my wallet for Hobbies..etc.): ___?___ %

Some people may think this is stupid to do at such a young age, but I figure the way things are going right now in the economy, it wouldn't be a bad idea to start...

Thanks for Reading and I look forward to Reading the Responses,

Cole Mayfield

It's always great to start at such an early age.
My personal recommendation to you is to start an IRA (Roth or Traditional pick one).
$400 a month
$100 to your IRA
$50 Cash to keep at home
$350 Spend/Save in bank account

Cheers and good luck!

**ColeMayfield** · 03-19-2012, 04:10 PM

Idea/Plan ??? - Input Welcomed !!!

First Off, To Everyone who Replied, I REALLY Appreciate all the responses...

It is nice to know there are some kind people out there who are looking to help others !

I think after reading Everyones responses, I have decided to go with this idea...

For Example, my first pay check was $135.32 (Income for just a few hours spent after School at work for 2 weeks)

$135.32 / 2 = $67.66... I plan to withdraw $67.66 from my Account and Leave the other $67.66 in my Savings Account... (50/50)

I plan to subtract 20% of my $67.66 I withdrew ($13.54) and leave it a side.... Let it build up a bit and then put it in a
IRA later on...

Left Over I will have $54.12 for Spending Money...

Anyone have any Input ??? Sound like a good idea to start with ???

Thanks,

Cole Mayfield

**kork13** · 03-20-2012, 01:24 AM

I think that's a great going-in plan. Just remember that you can (and should) always re-evaluate your plan as time goes on. Most likely, you'll adjust it somewhat as time goes on, and that's just fine as you stick with the fundamentals of saving.

Going forward, it might be easier for you to think of it as proportions of your total pay. The math is easier and the plan is simpler than saying "20% of 50%"
- 50% to your Savings account
- 40% withdrawn for spending (cash)
- 10% set aside for a Roth IRA (you should leave it in your savings account until you have enough to start an account).

Some notes on the IRA since you seem interested in starting one:
- First and foremost, I respectfully disagree with Jadet... You should only consider a Roth IRA right now. Because you make so little (~$5000/year), you will most likely owe very little (quite possibly zero) in taxes, so the Traditional IRA would give you no benefit, whereas a Roth IRA will be hugely beneficial to you.
- You're likely going to need to build up a fair chunk of money before you can start it. Some companies require $1000-$3000 (or more) to open a new account, though others will let you start with just $100-$500 if you also sign up to make automatic contributions of at least $50-$100 per month. Vanguard and Fidelity are both great companies for starting into investing, though there are many good options out there.
- Understand that your parents will need to help you set up your IRA. Legally, you're a minor and can't own investments on your own until you're 18. So talk everything over with them, and discuss what sort of investments would be appropriate for you. Most likely, the best answer for you right now will be to simply buy into only one indexed mutual fund that follows the S&P 500 stock index. But talk it over with them, and let them help you as you get started with it.

Otherwise, good luck, and I hope you stick around here... You can definitely learn alot about finances and smartly using your money from everybody that contributes here.

**greenskeeper** · 03-20-2012, 02:51 AM

every other paycheck.

one is for savings (doesn't matter where), the next is for spending and so on.

I did this when I was in my teens, drove a car that I owned, and had money for college. Still had to take out student loans but paid them off withing 4 years of graduating.

Don't fall into the credit-card trap that a lot of people do at a young age.

**MonkeyMama** · 03-20-2012, 05:40 AM

Agreed with kork - ROTH is the only thing that makes any sense. You also don't want to put aside money for retirement that you may need soon for college, etc. At least with a ROTH you can take the money out if you need it. It also makes far more sense from a tax standpoint.

My only change to this plan is I would keep the money you want to eventually put into an IRA, into your savings account. I am of the mind that except for a small emergency stash of cash, the only money I don't have invested or in the bank is money I intend to spend, like today. Plus, it's harder to lose the money (just from a security standpoint) in the bank. You can always keep track on a piece of paper how much you intend to transfer to an IRA later, if you are just trying to keep it separate.

**BuckyBadger** · 03-20-2012, 07:20 AM

I agree that a roth is the only way to go...

You should also tell your parents about your savings goals to contribute to a roth IRA. There is usually a minimum amount needed to open the account, and if your parents are anything like mine were (and if they are in the financial position to be able to, of course) they will be happy to help you start saving.

My parents were able to be generous, and they liked encouraging my saving tendencies, so my dad helped me with the initial deposit and then matched my contributions until I went to college.

Now, I understand that this may be impossible, but even if they can't help you save, they will still be proud of you for doing it on your own and you should tell them about your plans.

**MiaVitug** · 03-20-2012, 07:56 PM

I think it's good that you're starting young and thinking ahead.

I agree that 50/50 plan (50% on savings & 50% on spending) is good.

Maybe if you really don't plan on spending much you could increase the savings ratio from time to time (say 60% on savings & 40% on spending)

Then if you have kept so much on savings, maybe you can plan on how to increase it (by investing on a small biz perhaps? or such) But try not to put all your savings on that investment... Just set aside a certain percentage of your savings to an investment... In case that investment does not work well or goes as planned, at least it won't be such a painful loss.

**dh1989** · 03-21-2012, 07:52 PM

I started saving when I was 15. You're off to a great start.

Your plan is going to be a little different than most people with a fixed income (and also fixed or mostly fixed expenses). I run my finances a lot differently now at 22 than I did at 15. I just gradually built on and adjusted my budget over the years to meet my needs. As others have said, it is OK and good to re-evaluate your situation and goals from time to time.

I would suggest setting up a basic budget beginning with the amount you feel comfortable having for spending money. If $50/wk is that amount, so be it. If you are comfortable with less, that's fine too. Whatever it is, that is your first line on the budget. Everything else goes to savings in one category or another. I opened a Roth IRA when I was 16 and contributed a set percentage to it. I set another larger portion aside to start saving for a house downpayment. I was fortunate enough to work full-time through college and cash-flowed all of my college costs by simply making college a line on my budget expenses.

When you eventually move on to higher and more stable income, you can go back and re-evaluate things. When I was 16 I kept about $50/wk for spending money. Now at 22 I cap spending money at 10% of my net pay. I make about $30k/yr so that still breaks down to about $50/wk. That is pure spending money - all necessary expenses (gas/food/rent/etc) get budgeted out before that. With this strategy, my savings amount has grown substantially over time, while keeping my spending the same. As long as you don't keep upping the spending with the income, you will do very well.

Good luck.

Saving Money - 16 Year Old