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Financial advice for current 18 year olds. How should we begin to accrue our wealth?

Hello, I am turning 18 this year and I am thinking of ways to be more financially independent. Moreso what steps I should be taking at this age to build and compound my wealth for the future. Let me know! finance money

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Matthew’s Answer

Build a budget that lists how much money you earn from your work. Create a list of your monthly expenses and at the TOP of the list and the FIRST thing you pay every month is SAVINGS. Try to make this 10% of your earnings. This is very, very hard to do. NEVER use this savings for living expenses. Only use your SAVINGS for investment in other assets that will create value or generate more income for you.

Your biggest asset when you are young is your time and you will trade your time for money when you get a job. The amount you are paid is based on your talent and skills. These can be improved through practice and education. That is why it is so important to continue to to learn and get formal education throughout your life. It is directly connected to how much your time is worth and therefore how much you will be paid when you sell your time to your employer.

Wealth is built through discipline and self-control and most people are not very good at it. But it is a skill to be learned and practiced. It can be mastered if you want it bad enough.


Take home pay check $1,000

SAVINGS @ 10% ($100)

Budget to live on $900

If you can do this starting at 18 years old, you will be a millionaire by the time that you are 40.

Try it. You have nothing to lose and EVERYTHING to gain.

Matthew recommends the following next steps:

Create a Budget
Pay yourself first each month in the form of SAVINGS
NEVER spend your savings on livings expenses (like a nicer car or bigger house)
Invest savings only in assets that will create value or income for you
Improve your ability to get paid more through education or building performance skills

Hey Matthew, thanks for the in-depth answer and the awesome checklist! Somaiya A.

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Jonathan’s Answer

Somaiya, great question! Easy answer, start investing as soon as you turn 18, the biggest thing on your side is time. Monthly investments do not need to be large, but rather a consistent percentage of your income. I would recommend investing at least 50% of your gross income every month. If by mid-20s you're averaging a $100,000 salary, this will put you in a financially free position in your mid-30s. I'm only 25 and have been investing since I was 18, so providing recommendations from personal experience. When you're 18, open up a roth IRA (start with all tax advantageous accounts first before investing in stocks through a personal trading portfolio). The max contribution is currently $6,000, if you can't contribute $6,000 then contribute as much as you can. And, don't forget to invest the money you contribute, don't just sit it in the cash or money market account. If you're employed, look to invest in your company's 401k program, striving to max that out as well which is $19,500. Even utilizes your employers HSA account as another investing account, with a max contribution of $3,600. Once these are being maxed out and you're still not at your 50% goal, open up your own investment portfolio to bridge the gap. Invest in strong dividend-paying companies, or high return mutual funds, depending on your risk appetite. With all of the above, simply remember that 50% invested should be your target and remember as your income increases, increases your total investments. Don't commit to investing $X amount each year, because as you make more money your % invested will continue to drop. Starting this habit at 18 will also teach you to be disciplined with your money and live off only 50% of your salary. Invest first, spend whatever you want after. You'll be way ahead of all your peers and wealthier than anyone you know not already investing.

Hi Jonathan, thank you for your thoughtful and widely insightful answer. Very helpful! Somaiya A.

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Bruce’s Answer

Live below your means.
Do not spend all or overspend your paycheck.
Biggest wealth killers are: more car than you need, more apartment/house than you need.
Having a roommate is a great way to save early.
NEVER carry credit card or other consumer debt.
Keep track of your spending.
Save up for big purchases so you can pay cash.

As others have said, pay your savings first and consistently.

Hi Bruce, thanks for the direct and concise advice. Appreciate it! Somaiya A.

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Amy’s Answer

Good question and even better that you are thinking of this at the age of 18. Accruing wealth by saving money is my first piece of advice. In 5 years (and beyond) you will be thankful to your 18year old self that you began saving money at an early age. First and foremost, determine your avg monthly expenses that are fixed ie rent / car payments / groceries /utilities and the variable expenses ie anything else that you typically spend your money on in an average month and identify your monthly inflows ie how much money are you making per month... Use this to determine how much you can put into your savings each month. You can even set up direct deposit to allocate a portion of each paycheck to your savings and the rest to your checking account.
It's also important to build your credit so that by the time you look to buy a car or a house, that you have many years of credit history to help boost your credit score. Do this by opening a credit card, but remember the responsibility this holds ie need to pay it off each month so only spend as much as you planned in your pre-defined budget.
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Rip’s Answer

Compounding wealth for the future is the relatively more easier question. Put money away for your retirement systematically every couple weeks or month. 401K is best because you (shouldn't) be able to touch it. VERY IMPORTANT- Don't mess around with investing in single stocks, that's probably going to quickly end up as gambling not investing. Stick with something highly diversified only, e.g. S&P 500 Index only. Any amount that you can live with, no matter how small. Enough that you can watch it grow and remain interested. If your employer matches some portion of it, that's basically free money, who doesn't want that.

The first question is more difficult. I would start with a conservative budgeting exercise to figure out how much you can afford to "spend" each month. Stay away from credit card debt. Borrowing money for college (ie student loan) is obviously totally fine, most of us have had to- That should be considered as an investment. Start thinking about how much it would cost to live on your own if you aren't already and include that in your budget. A car is OK as long as you can comfortably pay the monthly installments and insurance after including a reasonable monthly living expense and a "cushion" for the unexpected.

Thanks Rip for your insightful answer! Somaiya A.

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Orville’s Answer

Hi Somaiya,
Unfortunately most of us do not learn basic financial management skills in school, and many people have to learn to manage their finances the hard way - usually by doing things like overspending and getting into a lot of credit card debt. The fact that you are asking this question at your age tells me that you are already starting off on the right foot because you are thinking about these issues. As others have already said, it is very important that you save as much money as you can. This does not mean that you should not enjoy your life it just means that you should do so responsibly. Also, avoid taking out/using credit cards as much as you can, and if you must use a credit card make every effort to pay it off as quickly as you can. In fact, you should aspire to pay off any credit card debt in full every month.
As you save money you should start to invest that money as early as you can. You can invest in stocks and other securities or in real estate or other tangible assets.
Create a budget and stick to it! Always save your bonus!
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Nicole’s Answer

Hi Somaiya,

It is great that you are thinking about saving money at such a young age. There is a reason we say "the time value of money."

I am on the younger side myself, but I honestly did not know anything about Roth IRA accounts or 401ks until I started working. Four years is not a lot of time, but for those retirement accounts, it is. Get yourself a plan for retirement so that can count toward your savings.

Also do a periodic payment into a brokerage account, and then invest it in a passive investment like the S&P 500 or a sector ETF. Once again, you have so much time that the money will grow tremendously, even in five years.

Outside of that, do not live outside of your means and save wherever you can. Then you will be golden.

Best of luck!
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Yumi’s Answer

If you have a job, you can start putting money in IRA (individual retirement account). At 18, it sounds very funny to talk about retirement, but with the long time until retire, the money you invest in the IRA can ride out down times and grow. If bank / broker require you to be older than 18 to open the retirement account yourself, you can ask your parent to be a custodian of the account until you reach the minimum required (21, for example) become a sole account holder. IRA can be a regular IRA or Roth IRA. With the latter, your contribution is not tax deductible but when you take money out in the future, it's tax free (contribution to regular IRA is tax deductible but you'll need to pay tax on the withdrawal in the future). You can start small and invest in mutual fund and let time time grow your wealth (equity fund is a good option given the long time horizon).

Hi Yumi, thank you for the insightful advice. Will look into creating an IRA. Somaiya A.

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Christine’s Answer

Hi Somaiya. This is a very good question to ask . The important thing to know is that you must learn to save . From what you receive in salary, you would save a certain amount for every paycheck. You would need to monitor your spending which is called "balancing your budget". You must live within your means, thus be careful not to overspend . This also applies to having credit. The rule of thumb is to pay the balance of your credit card once due and not incur interest. There are many useful tools and books you can use and read on the subject.
I wish you all the best!

Hey Christine, thank you for your feedback! I found it to be helpful. Somaiya A.

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Rebecca’s Answer

I am glad to hear that you have already started to think about this question. It is better to plan this early. We need to have some savings for contingency situations.
Firstly, you need to think about how much you need to spend each month. You will know how much remains you will have. Then, you can consider to divide this into a few portions:
1. Keep some monies for contingency purpose or leisure
1. Saving deposit - This part you can consider to setup time deposit in the bank
2. Investment - You think about the risk level you can accept. Also, you may need to study different investment on the risk and potential return. I would not recommend you invest in high risk products.
Hope this helps! Good Luck!

Hi Rebecca, thank you for your feedback. I found it helpful! Somaiya A.

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Gloria’s Answer

Hi Somaiya,

You have gotten some great advice here. The number regret that I have is that I did not engage in the 401k offerings of my employers when I was in my 20's. Even if it is a small amount, start to take advantage of many companies who offer matching of your contributions. Some 401k plans can also be borrowed against at a future date. Why is that important? You can borrow from yourself and pay yourself back with interest. It is a way to maximize your own money.

In addition, make sure that you consider what an employer can offer you outside of your salary. Take a look at the total offerings from the cost of medical insurance to the other benefits that may be available to you. I work for a vary large company that sells products. I get a great discount on these products. In addition, I get a lot of discounts on everything from car loans to vacation options (hotels, etc). Those discounts can really offset expenses in your life.


Hi Gloria, thanks for the insightful advice! I will take note of 401k plans. Somaiya A.

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Kwame’s Answer

Start by investing your money in simple index funds (NASDAQ100, QQQ). Dollar Cost Average (putting away money every pay period). Reduce expenses where possible. Obtain good debt (real estate) vs. bad debt (Store credit cards), look for additional side jobs.
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Mohd’s Answer

Start investing from a young age even its it is a small amount and you will be thankful you did in retirement. Make sure to diversity your investments in different asset classes to lower risks. Learn to read company financial reports and utilize earnings releases to invest in up and coming firms.
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Calvin’s Answer

Save, Save, Save..... Then invest, but diversify. Building a disciplined is very critical. Not easy, but doable.
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Elizabeth’s Answer

Biggest thing to help build wealth is savings, especially by contributing to a 401K or similar retirement type account. The earlier you start saving, the more time that money can earn money for you.

When I first started working, I began contributing a very small amount to my 401K. Over time, as I received salary increases, I also increased my 401k contributions.

Live within your means, limit credit card debt, and save what you can.
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Michael’s Answer

I love seeing questions like this, young folks that are thinking about their inner FIRE (financially independent, retire early!).
There have already been so many wonderful answers so I'll just try to echo the ones I feel the most strongly about:
* pay yourself first! Savings needs to go in every paycheck no matter what
* try to leverage an IRA and/or 401k as much as possible. Ensure you're getting the maximum match from your employer if offered!
* try to keep some liquid cash in a default savings for impromptu expenses like needing a new car, moving to a new city etc. Seeing this "secondary" savings get depleted for emergency uses won't be as unnerving since your primary vehicles will continue to grow!
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Hilda’s Answer

I would recommend you save some of your income and begin to invest in low-cost index funds to begin.

Hi Hilda, thanks for the straightforward and direct advice. Helpful indeed! Somaiya A.

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Eugene’s Answer

You can use time to your advantage, by utilizing "Compounding Interest". General Idea is the earlier the start, the sooner your savings can start making money for you.

Setting up a recurring deposit into a saving account, is a simple and painless way to start. This way everything is automatic and you will be pleasantly surprised whenever you periodically check the balance :)

Hi Eugene, thanks for the advice. Will definitely look into the concept of compounding interest. Somaiya A.

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Nick’s Answer

Albert Einstein is reputed to have said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it.”

While it is heavily debated if Einstein actually said that, the lesson here is a very true one. When you have the ability to invest early in life, you have the flexibility to take larger risks relative to those starting later.

A great low cost option would be a passive index fund that diversifies your risk across a broader index of stocks and keeps long term compounding fees low.

Hi Nick, thanks for the advice. Great quote! Somaiya A.

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Mark’s Answer

There are only two ways to accrue wealth: save (aka spend less than you earn) and invest. You need to do the former first before you can do the latter. Practice saving $ first and worry about investing a bit later in life.

On investing: you can save yourself a TON of money over your life by spending even a small amount of time understanding how to invest in the stock market. There really is no reason to pay a financial advisor 1% a year to do something you can do yourself.

Hi Mark, thanks for the advice. Insightful indeed! Somaiya A.

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Guadalupe’s Answer

Hi Somaiya,
I am glad to hear that people at your age are thinking about this question, because it is better to plan early.

1. You should live below your means.
2. Do not spend all the money you can make
3. Share costs as much as you can i.e. roomie, etc.
4. You must not consider credit card as an extension of your paycheck
5. When you have debts you must pay the most expensive in terms of interest rate
6. Be strucured in you income vs your expenses

Hope this helps and Gook luck.


Hey Guadalupe, thanks for the advice! The listed points are specifically helpful/ Somaiya A.

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Becky’s Answer

Starting a Roth IRA is a great way to start saving and is free on many platforms (ex. Fidelity). You can contribute up to $6K a year, pick a few ETFs/index funds to invest your contributions in and the money will grow tax free!
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neil’s Answer

Its never too early to start thinking about long term savings & whatever form that takes for you. After reading many of the answers here you'll find that a lot of folks regret not starting earlier. Obviously easy in hindsight, but im certainly no different than most.
I have a 19 year old daughter & we recently started a small savings plan ( a Large Cap growth Mutual Fund). I encouraged her to periodically add a portion of her earnings and/or savings to the fund. I stressed that she should look at this as a long term savings plan - and unless she encounters an absolute emergency - so a 5-10 year time horizon is something we talk about. And I always think its good to have an idea of what you're saving/investing for - house down payment, new car, travel etc, i find it adds a level of encouragement/motivation. I also encouraged my daughter to treat herself with her hard earned monies...its a balance versus savings.

Everyones needs & abilities will be different and savings/investing will be very personal....but broadly ive encouraged my daughter to explore, research & understand the following
1. History of markets over time
2. Discipline of dollar-cost-averaging
3. Basics of investment vehicles - mutual funds versus individual stocks versus ETFs etc etc
4. Monitor your account periodically - but no need to do it daily..!!!
5. Ask questions

I hope this helps...and good Luck
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Jill’s Answer

start contributing to a Roth IRA

Thank you Jill! Somaiya A.

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Angela’s Answer

What a smart question to ask at age 18!
If I am 18 again, this is what I will do differently:
1. travel cheap but make it to as many destination as possible. you will find it harder and harder to travel with a low budget when you get older or after you have a family. Try to travel as many places as possible when you are young which can potentially save you more money.
2. Don't rush to pay off your student loan. Instead, start an investment account and invest half of the payment.
3. Never carry credit card debit. Credit card interest is the highest you will get in the market.
4. Build emergency cash in your bank account. At the minimum of 3 months of your living cost.
5. Stay away from smoking/drinking habits.
6. Don't buy about luxury clothes, shoes and bags yet, your future occupation will tell you if you need them.

Hope it helps!

Hi Angela, thank you for the great advice. Appreciate the list! Somaiya A.

Good habits help with financial independence as much as bad habits hurt. So take time to study your habits, don't over spend and avoid spending money for emotional relief. Mohamed El Hioum, CFA

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Mohamed’s Answer

I like how you asked about accruing wealth. In my view there are prior levels to accruing wealth, first be financially independent, second secure your retirement and future needs (kids college), then if possible start accumulating wealth for other purposes, charity, better life... If your objective is to accumulate as much wealth as possible, you need to work hard and take some risk early in your life. At each point in your life you have to assess what your objective is and how badly you want to achieve it and that dictates how much effort your put in it. Financial independence and securing your retirement may require you to probably just work harder than the average person, but achieving exceptional results require more work, more risk (and luck).

Good habits and access to help will let you go farther so work on those along the way as well.

Mohamed recommends the following next steps:

Decide what you ultimately want in your life
Assess what it would take to achieve it (study successes and failures)
Determine if it is worth it for you