My brother-in-law gave me $15K for my 19th birthday and called it “pocket money.” I’ve never invested before, so I’m not sure if I should put it somewhere or just enjoy spending it.
Absolutely. Invest it in VTI or VOO, and leave it there (and reinvesting dividends) until you are ready to buy a home in your 30’s.
Or, spend $5K, and invest the rest. You’ll thank yourself later.
This.
Investing in VTI or VOO is basically just investing in capitalism, and you’ll likely do better in these ETF’s or an index fund than trying to pick winners and day trade yourself.
Invest it in VTI or VOO
Some of us don’t know what those acronyms stand for
Both are Exchange Traded Funds from Vanguard. VTI is "the whole US stock market, and VOO is “just the S&P 500”.
- Open a brokerage account, I usually recommend Fidelity as I find them easy to get newcomers onto.
- Put the money you want to invest in there.
- Use that money to buy either fund
- Forget about it for 10 years
- Now you have your house down payment, probably
These are low fee index funds offered by Vanguard.
Probably a vanguard fund of some sort. Basically a generic retirement fund. Though there’s probably different kinds, vanguard is usually what the default is when I get offered retirement plans.
Best advice right here
40 years ago, in 1985, $15,000 was worth $5,000. The S&P 500 was valued at about $185/share. 5000/185 = 27 shares. SP500 today is about $6,664. 27*6664 = $179,928.
Go ahead and ask every 59 year old in your life if they’d feel better about their retirement with another $180k sitting in an S&P 500 ETF.
Open an account on Vanguard or Fidelity or Schwab or whatever, buy an S&P 500 ETF, and leave it the fuck alone.
Don’t forget to include reinvested dividends.
That makes it just under $400k, big difference.
I used this calculator. I took the deinflated $5k starting figure so just use the nominal results, not infusion adjusted.
If the next 40 years performs the same, with reinvested dividends, $15k will get you almost $1.2mm. That’s nominal, I wouldn’t want to guess about inflation adjusted.
Without knowing more about your situation, the standard advice would be something like:
- Pay off any debts, credit cards, etc that you have.
- Top off your emergency savings. This should be somewhere between 3-6 months of expenses.
- Put the rest if any into retirement, probably an IRA.
Two points though:
- Take some and have fun with it, maybe $2k-4k. Get some nice clothes, laptop, take your SO to a very fancy restaurant.
- $15k as pocket money for a 19yo?!? That’s a generous brother in law.
This is about the best advice you’re going to get here. The only thing I would add is that it should be a Roth IRA. Chances are you’re in a low tax bracket (I guess assuming you’re an American, if not…look into the equivalent in Canada, etc.) so it could be really helpful when you’re older and retiring.
Doing the math, if you put $15k in a Roth IRA (you can’t do that in one year, but bear with me) when you are 19 and just let it sit, at a 6% average interest rate you’ll have $265,303.41 by the time you’re 67.
No sense paying off debts early if their interest rate is lower than the profit you would get by investing. This is dependent on timescale though.
Unless it’s an auto loan or something, most debts have a higher interest rate than 9%.
Right, so if this 19 year old has a government-backed loan for his furnace at 3%, he should leave it alone.
You will not regret investing it if you invest wisely (like an index funds or something like that). Do your research.
Coming from someone who wishes they invested earlier rather than shoving my savings away in a checking account - if you can’t think of something off the top of your head that you would need that money for in the next year or two, invest it in an index fund. It’s braindead easy, does not require you to manage it, and will steadily grow 6-10% each year which beats any high yield savings account by a fair bit. So you just set it and forget it and then maybe in 10 years you remember you invested 15k in VTI or VOO and now you have around 30k or more depending on how well the market did.
There will be market booms and busts, and you might end up losing money in the short term, but as long as there is a functioning economy, the line will inevitably go up.
I prefer index funds over bonds because you can always sell your position if you need a quick infusion of cash.
Again, this is just if you don’t already have designs on how to spend the cash. If your bro gave it to you to enjoy it as you see fit, you shouldn’t feel obligated to save it. Do what you think is right for yourself.
as long as there is a functioning economy, the line will inevitably go up.
That gets to be a bigger if every month forward
Very true, however, 15k sitting in a bank account will be equally as worthless as a valueless security if the economy completely imploded.
I’ve also noticed that the economy is pretty robust in it’s ability to weather storms that should theoretically cripple it. It would take an event so catastrophic that all sectors of business are heavily impacted. Barring all-out civil war, I can’t see that happening. Even a global pandemic saw certain businesses do better than ever - companies that made PPE, hand sanitizer and toilet paper mostly.
Definitely save it somehow. That could be a down payment for a house.
$15k? In this economy?
How much is a typical mortgage downpayment?
20% of the price is typical and horribly out of reach with how expensive housing is
I put 3.5% down.
What’s the typical price
Still, 15k invested now while OP is 19 could be helpful in a decade.
Oh yeah, absolutely
More like 100k
So the house would be 1 million USD???
Take a look around https://www.zillow.com/us/
You can probably get a small house for 200k-300k in “middle of nowhere” parts of the US, but if you want to be in the vicinity of a big city (which is typically where most of the best paying jobs are) you will need more like 500k for a small house, and in the most popular areas (like the areas around Sam Francisco, Los Angeles, Seattle, Washington DC, Boston, or New York City) you might need more than 1 million.
By “small house” I mean like at most 3 bed 2 bath.
Even if you are going for a 200k house, you’ll need at least 40k for the down payment.
That would be 0.5 million USD (20% down payment), which is about how much a house costs in many parts of the US. In the most popular areas, 1 million USD is how much a modest house costs, and you’d need at least 200k for the down payment.
It depends on whether people actually want to live where you are buying the house.
Holy shit yes. Compound interest is a hell of a thing.
Find a financial advisor that is a fiduciary, not just some rando on a bus ad or trying to do Bitcoin yourself or using a buddy’s friend or whatever. A fiduciary is legally obligated to work in your best interest, even if it means they lose money themselves.
I would also recommend using someone not related to you or in your social life at all. It’s someone you meet with once a year and their only job is to make you money as fast as possible because they get paid based on how much their clients invest.
Then you can just watch the line go up.
And if you can, make a monthly contribution to that account as well. Even like $50 a month makes a huge difference over the 40-50 years you’ll be investing.
This. I was going to throw out some advice in support of investing, but this is better than my plan of sharing anecdotes of my investing adventures.
Find a fiduciary, explore your options and do what makes the most sense and feels comfortable to you.
The short answer is: any amount of money is ‘worth’ investing.
$10k at 6% for 40 years is $100k. That might let you retire a couple years early. Conventional wisdom, among people, let’s say 40+ years old, is going to focus on retirement, wishing they’d started saving earlier, and the incredible power of 40 years compound interest.
At 19, though? You’ve probably got college and the potential for student debt coming up. Your first car. The down payment on a house. All of those things can be considered “investment,” too. They might have much better benefit to you, both in the short term and the long term. Or, if your BIL is ready to drop $15k as ‘pocket money,’ maybe you have enough family support that none of those things will be a concern. Hell, maybe you have enough family support that working a job from which to retire isn’t even a concern.
This is a marshmallow problem. Do you want to buy a car, take a fantastic trip somewhere, or just gamble like a big shot right now, or would you rather have less college debt, buy a nicer house, sooner, or retire earlier? Nobody else can tell you what you’ll enjoy more.
I don’t have any big purchases in mind. My sister got me an apartment and car last year for my 18th birthday with her husband’s money. We’re Swedish (he’s Chinese and my sister lives with him in China) - so free university for me; I don’t have any debt or anything like that. Sister has retired our parents and is supporting our family financially. But this is the first time he gave me money directly.
Sounds like this is a good opportunity to learn something about yourself. It sounds like you don’t have any immediate needs for this windfall and it sounds like you don’t have strong desire to spend it frivolously. That’s good. Maybe you’re looking for an excuse to spend it frivolously. A lot of young people, given a big wad of cash, will rush out and spend it on some aspirational thing or experience - generally something that’s been all over media, or that their favorite influencers have raved about - then be left with the thing, which isn’t as cool after a few weeks or months as it seemed, or the memories. That pile of money came easy, left easy, so it doesn’t feel any different to be without it. That’s a trap known as the hedonic treadmill.
You can do this experiment on yourself: take some of that gift - enough to feel like “a lot” to you - and get yourself a nice bit of bling. Something you’ve had your eye on for a while, but never thought was realistic. Write down why you chose that thing and maybe a 1-10 scale of how much you think you’re going to enjoy it. Come back to that page in six months.
But I would definitely put most of it into some broad-market index/mutual fund, whatever’s available in Sweden. Making saving/investing part of your money habit early in life is a hell of a lot easier than trying to change bad habits later. And I don’t think your sis/BIL will offer you retirement the way they did your parents.
Sweden in particular has a really low income inequality but a really high wealth inequality. Swedes are underestimating how much they should invest, basically.
The universal advice for money you don’t need right now is pay debts, then plan for emergencies (your family would help you, sounds like), then invest.
At 19, mathematically, you should invest mostly in equities (aka stocks) - they go up and down but earn like 10% a year on average (compounding), and you don’t really have a deadline. The one trick is you can’t panic sell when it goes down. You should diversify as much as possible, unless you can predict the future, and possibly nobody can.
Usually managing taxes and taking advantage of government programs is the third ingredient. I have no idea what that would be in Sweden.
Does free university also mean free housing and meals? If not then you might still want to set some aside for university or invest some in some account that lets you easily access the money if you need it in the coming years. Beyond that the rest of the advice in here applies: take some amount for something fun or useful, pay off/down any debt you might have, and invest the rest. You’re young so I assume you don’t have much debt. Investing with a long-term mindset can work fantastically for you at this age. Obviously there’s a lot of short-term uncertainty in the world today, but if it’s money you don’t need now, the long-term risk/reward or cost/benefit leans heavily towards investing what you can now.
To be fair, 100k 40 years from now will have the spending power of about 50k. The real power is in continuing to save as it compounds.
The short answer is: any amount of money is ‘worth’ investing.
Well, there’s usually an upfront cost to investing, and always a cost in time and thought. Opening an investment account just for the change you found in your sofa would be dumb.
That’s a nitpick, though. Unless OP was in China themselves (where there’s tons of rules and barriers) it would be worth it for 15 grand.
I’ve been investing since the early 1980s and it always worked for me - allowing me to retire early.
I invested a lot less. Go ahead. Long-term investment usually pay off if you don’t need the money
Yes, absolutely.
This flow chart is helpful
https://imgur.com/personal-income-spending-flowchart-united-states-lSoUQr2
Holy shit yes. This is a peak 19 y/o question, and I say this with no disrespect intended.
I’m in my 30s now and I really wish I had invested 15k when I was 19. I would be sitting a whole let better than I am now.
It’s not much money to invest, but if you don’t need it and don’t have any big ticket purcases in you future I’d suggest opening a brokerage account and buying shares in an index fund.
Given the situation these days, even index funds aren’t a sure thing, but it’s about the best thing I can think of for that amount of cash.
Someone else posted about making an investment and I think, as an elder millennial, this is the right answer. However, they took a prudish and boring take on the matter, one which will almost assuredly back fire as youl get bored of it sitting in an IRA and probably lose it trying to “invest” your self in the rigged casino which is the stock market. Just, having been 19 myself once, I do remember what it’s like to have that kind of psychology. I strongly DONT recommend this form of investment for that age group, because it’s just not a good fit for most 19 year old personalities, and what matters the most is finding a good fit between your personality and what you want to do.
But you can expand your vision on what it means to “invest” that money.
15k is enough to start a small business. Not a big business mind you, but something. A pool cleaning business can be run out of the back of a used car or small truck. People also require the services of power washing, and while a high quality power washer isn’t cheap, it’s also not monumentally expensive either. Landscaping also fits this billet. 6k in tools, a 9k truck, and you’ve got a business that can sustain you. It also teaches you to manage yourself, your time, your customers and potentially other people as employees.
Another way to invest this money would be to buy land. I don’t know where you live, but you can buy 15k parcels of land in plenty of places: https://www.zillow.com/pahoa-hi/ . You could buy a lot, and go live the jungle life off the grid. Or build a cam ground for your family to visit. Or buy a yurt and live in it. Or buy it and do nothing and sell it later. Or buy it and build a house. Or whatever your hearts desire.
Owning a bit of land that you can develop into your own vision can be highly motivated, and there is still plenty of it if you know where to look. Places like Arizona, and new Mexico also have some really amazing deals for land. And don’t be afraid to look internationally. 15 k can get you into some interesting places in South America, Africa, Europe (Italy in particular) and Asia. This could be the start of a whole new adventure! And one that ends with you still owning a piece of land you could then sell at a later date as your goals and motivation changes.
Speaking of adventures… 15k isn’t infinite money, but with a frugal mindset and a spirit of adventure, you could easily travel the world for around a year on that much money. But ding dong, how is that an investment? By spending the time to travel or have meaningful personal experiences you are investing in yourself to find out who you really are. Having clarity and really finding out who you are, these things develop the kind of character that prevents you from making bad decisions down the line. Spending the time to find out what really motivated you, to develop friends from all over the world, to build stories and an identity that will last you a lifetime: these have a strong return on investment. And no one has ever said, “boy I sure do regret those years of my youth I spent tramping around the world when I was young and beautiful”.
So yes. Invest the money. Don’t waste it on groceries or a car that’s going to need gas and insurance and maintenance. Go big. Use it all for one thing, to express one idea. But also, consider a bigger vision of what that idea can be. There is no need to only listen to accountants who only ever plan in living for the brief period of their lives after they reach 65 years old.
I put 5k in an index 7 years ago, now it’s 8.5k. average return for indexes is better than trying to do it yourself (gambling). Usually around 7%.
