Advice on Saving at 18
1. Are You in a Good Place?
Yes, absolutely.
- The average 18-year-old has little to no savings, and many are in debt due to student loans or credit cards.
- Your combination of savings, reinvestment experience, and tech-driven hustle already puts you ahead of the curve.
2. Focus on Your Next Steps
a. Managing Expenses
- Since you're transitioning to paying some bills, prioritize a budget to ensure your savings don't drain too quickly.
- Tools to help: Apps like Mint, YNAB (You Need a Budget), or a simple spreadsheet.
b. Keep Building Income Streams
- Explore ways to earn part-time or freelance income that align with your tech skills. Examples:
- Freelance Tech Work: Web development, crypto-related consulting, or coding.
- Gig Economy for Tech-Savvy Folks: Websites like Upwork or Fiverr can help you monetize skills.
- Tutoring: Tech or math tutoring can pay well and fits a college schedule.
c. Keep Investing Smartly
- Index Funds: Transitioning your savings into diversified index funds like the S&P 500 (e.g., Vanguard’s VFIAX or ETFs like VOO) is a great idea.
- These are lower-risk, long-term investments that can help your money grow consistently.
- Dollar-Cost Averaging (DCA): Invest a set amount regularly (e.g., monthly) rather than all at once.
3. Are You on Track to Be a Millionaire?
With $16k at 18, time is your biggest ally. Here's an example of how your wealth could grow if you keep investing:
- Assume an average 8% annual return (typical for index funds).
- If you invest $16k now and never add another dime, by age 65, it could grow to $586,000.
- If you add just $200/month starting now, it could grow to $1.4 million by 65.
4. Other Considerations
a. Emergency Fund
- Before putting all your savings into investments, keep at least 3-6 months' worth of living expenses in a high-yield savings account. This is your safety net for unexpected costs.
b. Roth IRA
- Open a Roth IRA if you have earned income from part-time work or freelancing. Contributions grow tax-free, and it’s perfect for young investors.
c. Education
- Keep focusing on your studies. A degree or certifications in a tech-related field could amplify your earning potential significantly.
d. Stay Curious
- You’ve got a knack for identifying opportunities (like the crypto project). Continue learning about emerging technologies or markets that excite you.
5. Advice for Staying Motivated
- Celebrate milestones (saving $20k, first index fund investment, etc.).
- Surround yourself with people or communities that inspire financial growth (e.g., Reddit’s r/FinancialIndependence or r/Bogleheads).
- Remember: Your journey to becoming a millionaire is a marathon, not a sprint. Stay consistent.