College kid wants to start saving

[TXAMHayden]

Hello everyone, I'm new to this forum so if I am in the wrong place please let me know. I am a 21 year old male who is trying to start thinking about the future. My parents didn't save very much money at all for me to go to college and I want my kids to be financially comfortable enough to go to any school they want. So if anyone can give me a few pointers it would be much appreciated.

[TXAMHayden]

I should have mentioned, I currently work at RadioShack part time while I go to school and I do not qualify to enter their 401k until I have reached my one year mark. The main information I am looking for is things involving Roth IRAs traditional IRAs and other things of that nature. I've done some research but I get very conflicting feelings on how a college student should start his financial saving future. I would really appreciate ANY and ALL help you can provide!!! Thanks and gig em.

[scfr]

How are you paying for your college education? Are you having to take out student loans? If so, as long as you are in college, your money may best be spent by paying cash for your education as much as you can so that you have as little debt as possible when you graduate. You can build a better financial future if you don't have to first climb out of a hole. Good luck and hook 'em.

[TXAMHayden]

Haha woah, what're the odds I get a longhorn to answer. Small world. In response, my grandparents are taking care of most of my education but I plan on training to be an officer in the United States Navy. Which hopefully will help me with grad school. So thats what you advise? I might end up having to pay for my senior year, but that's still to be determined. Thanks for the response!

[scfr]

I suggest the following, in order of priority.

1. Make every effort to graduate debt-free. If financial support from your grandparents is dependent on academic performance, keep those grades up! If there is a chance that you will have to pay tuition your senior year, start putting money away for that and apply for scholarships when the time comes. Stay away from credit cards. Either have none, or have one with a very low credt limit that you pay in full at the end of each month and use ONLY for necessities ... textbooks are necessities, beer is not. Honestly, if you can graduate not owing anyone a single penny you will be ahead of most of your peers financially.

2. Prepare for "real life start up costs" when you graduate. Start saving money for whatever extraordinary expenses you may face at graduation. These can include first & last month's rent plus security deposit on an apartment, interview and work clothing, and maybe a vehicle if you don't already have one and public transportation won't be an option. Make it your goal to pay for all of these things yourself, with cash. Make an estimate of what your monthly expenses will be and save up a couple month's expenses as backup (mini emergency fund).

3. Study up on your employer's 401K plan. Look first at when you would be vested in the plan. (Since you probably don't plan to work at Radio Shack for the rest of your life, when you look at the vesting situation you may decide not to contribute when you hit the 1-year anniversary.) But if the vesting situation looks OK, look at the funds available to you. Research them ... feel free to come back here and ask questions. Be informed & prepared to start contributing when you hit the one year mark.

4. Once all of the above are taken care of, then look at an IRA. I'd recommend a Roth IRA since you probably won't get much if any tax advantage from a Traditional IRA. Because you are young, you can invest pretty aggressively. Look at a stock mutual fund. Recommendations on where to invest will depend on how much money you will be investing, because each fund has a different minimum.

Finally, you mentioned that you want to save so that you can fund your future children's education. That is an honorable goal, but don't neglect your retirement savings in favor of your children's education. Make sure you and/or your future spouse are taken care of. Your children probably won't want you moving in with them in your old age!

P.S. - I didn't go to UT but do live in Austin so couldn't resist when I saw your user ID and the Gig 'Em at the end of your post.

[TXAMHayden]

First of all thanks so much for continuing to reply to my numerous questions, I really appreciate it!

In response,

1) I fully understand and now that I think more into that is probably the way to go. Since interest on my student loans will undoubtedly outweigh the interest my savings could accrue in any form of investment strategy.

2) Do you have a way that you suggest I save these funds? I understand the saving part but where do you think would be a suitable case for my "rainy day fund" - even though I do not plan to have it be nearly as large as our states rainy day fund. The first things that come to mind are in a general savings account - Ex: Wells Fargo, Chase etc. Another thing I was wondering about is purchasing in bonds/CD's when I was younger my parents and grandparents had a few of these set up for me so that I could buy a truck and other college needs. Do you think this might be a route I should pursue?

3) I am a little confused on the usage of the word vested. Are you implying that some 401k's stay with the employer when I leave them?? Aka, lets say I do start contributing but once I graduate and leave the company will I no longer be able to contribute to the fund?

4) From the research I have done since initially posting I see that what you are saying in statement 4 lines up with a general consensus throughout the internet.

"5") Yes sir! I have also seen that where it says that a retirement fund is the first thing that I need to set-up/take care of -before- saving for my children's schooling.

Once again, thank you for all of your help. I know I need to do research on my own and find out what is the right path for me. The information you have suggested to me has been a great help and I do in fact plan to do -much- more planning and research on my own.

[PayThePiper]

Great advise on long term prep for retirement...and I would like to say its nice to see someone at your age aspiring to be financially prepared for the future. Some of the simplist and in my opinion most important advice I have heard came in the form of a tweet from CNBC reporter Jane Wells. She sent the following a couple of months ago..."Best financial advice I ever got: live on 70% of take home pay. Save 10%, invest 10%, give 10% the charity."

[scfr]

2) Do you have a way that you suggest I save these funds? I understand the saving part but where do you think would be a suitable case for my "rainy day fund" - even though I do not plan to have it be nearly as large as our states rainy day fund. The first things that come to mind are in a general savings account - Ex: Wells Fargo, Chase etc. Another thing I was wondering about is purchasing in bonds/CD's when I was younger my parents and grandparents had a few of these set up for me so that I could buy a truck and other college needs. Do you think this might be a route I should pursue?

My suggestion is start out with an interest-bearing checking account, money market account, and/or CDs. Consider not only banks but also credit unions. Start by checking your student newspaper or calling around to local branches to see if anyone offers special (higher) rates or bonuses for A&M students. Another place to look for higher interest rates or promotions is the web site Bank Accounts - Compare rates at DepositAccounts.com You can do national or Texas-speific searches. If you go with a bank other than a well-known national one, go to the FDIC.gov web site to make sure the bank is FDIC-insured. I do this before I open any new account; it's a good habit to get in to. CDs can be a good way to save up for money that you won't need for awhile. Bonds are great, but it may be too early for you to be purchasing those. Wait until you have graduated and have a clearer picture of your "after college" financial situation.

Regarding the bonds your parents & grandparents purchased for you (how very nice!), do you still have any? If so, I suggest you go to the Treasury Direct web site and make sure they are still earning interest. If they aren't, you'll want to cash out the bonds and put them in your bank or credit union.

3) I am a little confused on the usage of the word vested. Are you implying that some 401k's stay with the employer when I leave them?? Aka, lets say I do start contributing but once I graduate and leave the company will I no longer be able to contribute to the fund?

Vesting refers to how much of the money that your employer puts in to your 401K you can keep when you leave the company. (You always get to keep the money YOU put in.) Most companies require that you stay with them for a certain period of time to keep all of what they put in. In some plans you are vested gradually (for example 20% at 1 year, 60% at 2 years, 100% at 3 years)and in others you vest all at once (for example 0% until you hit 3 years then 100%). Each plan is different. To put it very simply, if you love the investment options in your 401K and you will save on your taxes, go ahead and put some in your 401K. But if you think the investment options are only so-so and/or you won't save on your taxes, don't invest in the 401K unless you will get to keep the employer match.

I know I need to do research on my own and find out what is the right path for me. The information you have suggested to me has been a great help and I do in fact plan to do -much- more planning and research on my own.

Keep it up. I'm sure you are way ahead of most of your fellow Aggies. Some day they'll be coming to YOU for advice.

[lewiskelly]

Hello everyone, I'm new to this forum so if I am in the wrong place please let me know. I am a 21 year old male who is trying to start thinking about the future. My parents didn't save very much money at all for me to go to college and I want my kids to be financially comfortable enough to go to any school they want. So if anyone can give me a few pointers it would be much appreciated.

Yes sure saving advice forum is a right place for your discussion.But i think you are too younger for saving.Still i want to appreciate for your thinking.You can do.Firstly you should open your Bank account then saving start.

[TXAMHayden]

Yes sure saving advice forum is a right place for your discussion.But i think you are too younger for saving.Still i want to appreciate for your thinking.You can do.Firstly you should open your Bank account then saving start.

Dear LewisKelly,

I do not think it is ever too soon to start THINKING about savings. In reply to your first statement, I meant the Personal Finance page not the forum in general. This below the belt statement was only reaffirmed with your horrid grammar throughout your post. "too younger" - "for your thinking" - "Firstly" - "saving start"

If you are going to come on this forum just to be hateful I am sure you can find many better forums where people will accept your fight. This is my future that I am thinking about so I don't understand why you think this was the place to come and try to troll someone.

Breathe.

[TXAMHayden]

Great advise on long term prep for retirement...and I would like to say its nice to see someone at your age aspiring to be financially prepared for the future. Some of the simplist and in my opinion most important advice I have heard came in the form of a tweet from CNBC reporter Jane Wells. She sent the following a couple of months ago..."Best financial advice I ever got: live on 70% of take home pay. Save 10%, invest 10%, give 10% the charity."

Thank you pay the piper! As a matter of fact I follow her on twitter already! Very smart and thought provoking tweets on occasion.

[Rainbow Traveller]

A 529 college savings plan is a type of investment account that allows you to set aside money for your child's education and let it grow tax-free. The federal government won't tax your money when you take it out of the account, as long as it's used for higher education.