Advice for VERY Young Dreamers (16-21)


Thinks s/he gets paid by the post
Feb 8, 2003
Nomadic in the Rockies
A very very young person posted a topic in this forum. I decided not to respond directly since he didn't seem serious, but I was surprised that someone that young had the attention span to find and post to this forum.

In case there are more, here are some bits of advice to keep in mind when you start working:
  • Read several books about personal finance because they won't teach you this in school
  • Don't carry debt (possible exceptions for college, house and *maybe* a reasonable car)
  • Save money out of every paycheck, anywhere from 1% or 2% on up to 10% or more; save as much as you can
  • Come back here around age 20 when you know more about working and personal finance
Starting with those bits of advice from 16-21 you may be able to retire at age 30 or 35!
And ask yourself before spending any serious money -- will I be happy 5-10 years from now that I spent this money now?

I have basically the same advice, but perhaps some different words around it:

1. Get out of debt and stay out
2. Invest in your life (e.g. get things on sale) and your job (e.g. go to school)
3. Pay yourself first, and squirrel away a most of every raise
4. Marry well, divorce is usually a financial disaster
5. Be conscious of what you spend. How long did it take you to earn that money, and is it definitely worth the effort?
6. Read. Tobias is my favorite.
bongo has good advice. Agree with the whole thing
Re. No. 4 (marrying well and divorce). I even agree
with that one although in my own case, my divorce was
largely what enabled me to retire early. I believe most people still marry for love without a lot of thought to
the long term financial impact of the combined balance sheet.
Talking about Reading. I would read "The Millionaire Next Door" Do not take it too literally but there are some great ideas to live by.

For young dreamers, the important thing is to think about both ends of early retirement - making a pretty good living and having a low cost of living.

You're probably already thinking about how to earn a good living, by choosing what field you enter.

For reducing costs, I like "Your Money Or Your Life" and the "Tightwad Gazette" books. It's important to cut back on spending so you can save more, especially when you are just out of school and probably not earning very much money.

Even better if you can continue to live with a similar lifestyle even when your income grows :) I've been trying to do that, and just salting away the unspent cash. In the first few years, most of the increase in your net worth will be because of saving. After that, all the money you've saved will start working for you - at that point, you basically have it made.
A teenager with any brains (yes, there are a few) can learn more from some of the ideas in this forum than from 4 years of college.

I'm so mad that I was never taught about the future value of a lump-sum or periodic annuity in high school which is a universal idea that applies to everyone. Instead we had to learn calculus and pascal, things specific to a small number of vocations.

Thank you God that I was able to realize on my own at a young age the basic philosophy of ER. Although, I still wish someone could have guided me in a straighter direction to financial freedom. I took a somewhat curved road to this end, mostly because in the late 80's (when I was still a teen) everyone else thought I was nuts about being able to retire at 40. When I finally learned the formula for calculating how much money I would need to save on a monthly basis to reach my goal for ER, I was awed with how easy it could be.
I have a 12 yr. old daughter and, from the beginning, decided my job was to teach her to be FI. Little things @ the beginning..trip to ice cream store when little and she said she would love to work reply was why not work hard, save your money, then buy the store and it's all yours? At age 9, she was receiving her weekly allowance and we added an annual $200 budget...hers alone, spend as she wanted. BUT no more than her weekly until the next year. At this early stage, I wanted her to develop regular saving skills and to learn that $200 was NOT a great deal of $$. She blew $125 in the first month and all was gone in 6. Next year she got $250 & weekly. The $250 lasted 11 months. At 10, we had a little conference and she went to $500 annual, no more weekly, BUT we covered the 1st of the major stuff, ie. boots, sneakers, coat, etc. Everything else, including savings, came from her budget. Now @ 12, she has $750/annual and responsible for all expenses/savings. She is welcome to EARN more but will not GET any more. We have rental props and she will do mowing/painting, etc. but she has to invoice me and payday is invoice, no pay, no pay advances. Sounds tough but it's common knowledge that I'm one of "those" moms.

Results? She's 12, has (3) $500 CD's laddered @ 6, 12 and 18 months. In 2003, she earned an additional $450 from us and currently keeps a balance of $600 in her passbook savings. She saves all gift $ and buys good deals @ resale shops and then re-sells on Ebay. Her team placed 1st regionally and top 15% nationally in the Stock Mkt Game thru an Investment Club in our bank. During one mtg, my genetic link to the future explained short selling to the group when an adviser was having trouble. She has considered opening a Roth but wants to wait since we are taking a holiday soon.

She has another friend of similar discipline but by and large her peers are more worried about making sure their thongs are showing "enough." Maybe she'll be their bankruptcy att'y! (thanks for letting me write my brag book)
(thanks for letting me write my brag book)

Thank-you. I'm happy to hear such stories. My only contact with kids this age is my neighbors. Their parents have recently declared bankruptsy while both are working. They earn plenty. They just spend more. What chance do their kids have?
Hello Busymom,

Fantastic. My son is 19 months and we have a little girl on the way. I'm not worried about teaching the kids good fiscal strategies yet, but will certainly start in the same timeframe as you did with your daughter. Did you find that the grandparents tried to "rescue" your daughter? Just curious. Congratulations on a fine job.


My temp job in 95 was at the my old plant and one of the guys in one of my former dept.'s said his kids were interested in stocks so I gave him an old Moneypaper Drip booklet and they picked Wendys and Pepsi for there first stocks. My last year or so of work 91-92, I gave him an old copy of the Handbook of Dividend Achiever's - don't know if he acted or not.

The point. Act - Time is money or Time in the market, not market timing. My best dollars were my earliest dollars.

With the benefit of hindsight - today I would say open a tax deferred plan as early as possible and buy America - total stock index and no I won't quote De Gaul again - although I'm tempted.

Reading is good too - but act, read, act. As an INTJ my bad habit is think, act, think.
Hello unclemick! Yep I think, act, think also. Sometimes
I even act, and then think think think :).

Re. De Gaulle, it's a good one. I also like "Ready money is like Aladdin's lamp (Byron). Also Carpe carpem!
(Seize the carp!)

John Galt
Chris - congrats on the second baby and thanks for the support....and yes, or rather, YES, one grandparent was always undermining our efforts. She didn't think it was "fair" that we were treating her so rough, after all, "she's just a little girl and the world is so scary so why not just let her be little." Most of the friends/family think we're tough on most levels, but I don't believe it's my job to give my kids everything they want but to teach them how to earn what they want. My husband grew up poor and working very hard (9 kids in 10 years) and I grew up with no $ sense at all...but a strong work ethic and no problems w/sacrifice. I work as a RE appraiser and could tell you stories about what I see...people begging me to "help them out with the value" or else they'll file bankruptcy...all the while I'm tripping over the beanie babies, bobble-head dolls and hundreds of kids toys. I remember one house I did where the wife proudly grandstanded that her decorator matched the LR paint to her fave orchid....but upstairs everyone was sleeping on either air beds or mattress on floor with boxes and milk crates for storage/furniture...sorry, off topic here unless we connect it to the point made earlier...what chance do these kids have? Hopefully some of today's kids will appreciate that there are negative role models.
Chris - something add'l that I just remembered while "helping" my daughter clean her closet...years ago I had her start a goal book. We used a plain scrapbook and labeled it "Near & Far Goals." She cut out photos of everything from skateboards to castles and ID'd 'em as near or far (short or long term)...

Obviously it's been a couple years since regularly used, but we talked about how she began to enlarge the big picture and to consider about spending that dollar now or waiting to add a few more to it and buy something else...
Hello Busymom,

Thanks for the reply. We have generous parents and have asked them to "please, just think about the number of gifts". So far they have been very cooperative. Between shower gifts, hand me downs, and gifts from family and friends, my son was clothed and had nearly all of the typical baby gadgets and stuff he needed for the first year. We are very lucky to have such wonderful people in our life. One of our friends asked us with great excitement what we got him for his first birthday, and we responded "a college fund". It's not very cute or fluffy, but it's what he needed. Believe it or not, he hasn't gotten a gift of a savings bond yet. With the monetary gifts he did get, we started an ESA for him.

I'm guessing that the tough part of teaching kids about good fiscal management is being firm without being too overbearing. Thanks again for the posts.

Financial education starts with chores when they are little. With two it was interesting to see them negotiate from week to week on who would do what.

Here is what I did when they were older: I made a list of appropriate investments for their college savings when each child was in middle school. I met with each child to discuss the status of their college savings account, discussed the choices on the list, and asked how it should be invested. One went 100% Magellan, the other 50-50 Magellan and savings bonds. The first watched his investments almost daily, the other never looked back.

Results: the first went to a state school and had no college debt; the second went to a private school and paid off her debt with a fantastic job. #1 is an entrepreneur, #2 is the controller of an investment firm.

That early experience paid dividends.
I opted to NOT start a college fund for my kids. I don't want the kids to consider college an entitilement since they have this cash-cow fund to use on education. We have our rental props and can borrow against them to help w/college costs. If the kids don't choose college or don't apply themselves, we have our retirement. Either way, we have the commodity (the house) and tenants will either fund my retirement or my kids' education. We have offered our daughter one of the rentals that we will owner-finance, she can rent the extra rooms and have roomies pay for her college and her house.

Sometimes I worry I think too much....but it's my job to teach her to be responsible.
Sounds like a good plan.

Should I ever go off and have kids (causing I believe a lot of money to change hands and much gnashing of teeth by friends and relatives), I think I'd set aside a little retirement fund for them instead of a college fund.

The advice I gave to all the college grads I hired was simple: It doesnt matter how much you're making. Put the minimum - 2% of your annual salary into the company 401k in the s&p500 index fund. That little bit out of your check will hurt a little bit at first, but after a month or two you wont notice anymore. Then forget about it. If you find yourself flush with cash at the end of every month, increase that 2% until it starts to bite into your wallet again. About the time you start thinking again about retirement, probably in your late 30's or early 40's, that will probably be the right time to think about diversifying your portfolio into other things and you will probably have had time to educate yourself on what to do with the money. And you'll have one hell of a nestegg already built up.

Of the people I still keep in touch with, now 5-14 years later, almost without exception they bring up that suggestion and the fact that they did it, and now have a huge leg up.
And you'll have one hell of a nestegg already built up.
Amen to that! I feel lucky more than smart for starting my 401(k) contributions at age 21. My manager had me watch an company instructional laserdisc explaining retirement options; what sticks in my memory is the comparison of two employees: one started saving for retirement at age 25 and stopped at 35; the other started at 35 and continued saving to age 60; both contributed the same monthly amount and had the same investment returns, but the person who started saving earlier at two or three times as much money as the other.

At the time I didn't know anything about investing, but now I know the effect illustrated was compound interest, and I also acquired the desire to learn how to more knowlegeably invest my nest egg.

But all the young person really needs to know is to start saving ASAP. Well, a safe no-brainer place to invest might be suggested, too. I agree with the S&P 500 Index fund advice.
Great advice to help me with my son when he gets a little older (I think 3 months is a little young to start talking about compound interest :D)

I am putting money away for college in a 529, but here is my plan...I am going to make my son save a certain amount of all money he earns for college, both so he learns about saving at an early age, and so he doesn't feel an entitlement. I will not mention the 529 until it is time to go to college at which time I will "loan" him the money for college...his repayment will go into an investment fund and when he graduates, I will have put enough away for him to put a down payment on a property...get him to sublet rooms to a couple of buddies and he will be well on his way to FIRE at a very early age...then he can join Dad as we travel the world...

I realize that a lot can happen between now and then, but without dreams and goals ---what's the point?
I've got a one-year old kid, and I like the idea of eventually paying her a large enough allowance to take care of all of her expenses, including college saving, so she can learn to fully manage expenses and investments before she leaves the nest. However, I also realize that's still far off, so I've covered her college expenses in the meantime via a big chunk of savings bonds.

Savings bonds can be used for education tax-free, but unlike 529 plans, there's no penalty (other than normal tax on the interest) if I decide to use the money for something else. (So, if you see me driving around in a Ferrari in about 17 years, you'll know my plan to have her save the college fund herself worked :))
I tried this as a 20-something and it taught me that many buddies are deadbeats that dont hold onto a job and pay the rent, and that when you finally throw them out a month or two later, they're no longer your buddies.

Also, there is no time too early for compound interest.
Well, when it comes to renting to buddies, I've been very lucky indeed. I've lived with three different buddies and two different girlfriends (I know what you're thinking, NO ! not at the same time !), and it always worked out fairly well. Even when the girlfriends and I went our seperate ways, no one tried to screw the other one out of money/property owned.

I've posted on this before, but when I bought my current house (A huge fix it up project) I moved a buddy of mine in with me who was between jobs, but had done electrical and carpentry work in the past. I let him live rent free, and he helped me fix up the place, and did much of it himself while I was traveling for work. Then he got a job and I started charging him rent. About that time another buddy of mine got a divorce and needed a place to stay, so he moved in and now he pays me rent. I made the rent very reasonable for both, for several reasons:
1. they are and have been good friends for years
2. Neither of them make a great deal of money
3.They take care of and watch the place when I am gone (which is a lot, like now)
4. The mortgage on the place is VERY cheap anyway, and between the two of them, its paid.
5. They still help me out finishing fixing up the place, which will probably take the rest of my life !
6. Its really nice having your buddies around, as long as you can live with people and openly discuss things that bother you without getting upset over it, and have a laid back attitude about most things.

So, for me and my buddies, this has worked out great. Of course, this is also a good way to find out who is NOT your friend !

Good luck, your mileage may vary....

Technically I started when I was 5 when my grandma gave me my first stock (MCI/Worldcom hehehehe). I am now 28 and have only been working 5 years in full-time professional jobs. The stocks and cash I have received from my parents over the years make up about 200K of my 300K net worth.
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