Well done on managing your finances at a young age! Suggestions for your savings: create an emergency fund, allocate for short and long-term goals, explore low-risk investments, learn about personal finance, and consider setting up a KiwiSaver account. Avoid lifestyle inflation to secure your financial future.
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“Hello, I’m 15M currently working 2 part time jobs (I am doing correspondence school) first job is 10-25 hrs a week at minimum wage. Second job is 5hrs a week at $30 per hour. Usually I will clear $350-$500 a week (in total from both jobs) I have barely any expenses, just a gym membership $30 a month, phone plan $65 a month and that’s it. I will usually spend about $200-$300 a month including expenses. (If I don’t make any special purchases like a phone) So I usually have give or take $1000 left over to put into savings. (I have a car sorted so I don’t need to worry about that) What should I do with my savings? Keep it for if I go to university? Any advice would be appreciated. Thanks”
(Original question on Reddit)
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Good work! You are doing great at your age, managing your expenses well and making good money! It’s great that you’re thinking about ways to manage your savings at a young age. Here are some suggestions for what you can do with your savings:
Emergency Fund
Consider setting up an emergency fund. Aim to save at least three to six months’ worth of living expenses. This will provide you with a financial safety net in case unexpected expenses or emergencies arise.
Short-Term Goals
If you have any short-term financial goals, like buying a new phone, going on a vacation, or making other special purchases, you can allocate some of your savings towards achieving these goals. This will help you achieve these short-term goals faster.
Long-Term Goals
Considering saving for university is an excellent idea. Think about opening a dedicated savings or investment account specifically for this purpose. Look into high-interest savings accounts or investment options with low risk and reasonable returns.
High-Yield Savings Account or Term Deposit
These are low-risk ways to grow your savings. A high-interest savings account offers a higher interest rate than a regular one. This money can sit free in your account, so you can withdraw it anytime without committing to fixing it for a certain amount of time. High-interest savings accounts earn extra interest when you don’t withdraw, which is a much better alternative to a regular bank account. However, if you know you won’t need to touch your savings for a long time, consider a Term Deposit, which often offers higher interest rates than savings accounts in exchange for keeping your money in the account for a set period. Commonly, you can set your terms from 30 days to 5 years.
Invest
Depending on your financial goals and risk tolerance, you could explore low-risk investment options like managed funds, index funds, or exchange-traded funds (ETFs). Investing can potentially help your money grow over the long term. However, it’s essential to do thorough research and consider seeking advice from a financial advisor or a trusted adult, given your age.
Learn About Personal Finance
Take this opportunity to learn about personal finance, including budgeting, saving, and investing. Many online resources, books, and courses are available to help you develop a strong financial foundation.
Set up KiwiSaver
If you already haven’t, open up a KiwiSaver account with your parents. Once you turn 18, you will be eligible for some of the benefits of KiwiSaver, such as employer and government contributions, which help you save more towards these big goals. But until then, you can earn returns on contributions made into your KiwiSaver account by your parents and also earn returns on previous investment returns, which can make a big difference over time. And the sooner you start, the bigger the difference.
Avoid Lifestyle Inflation
As your income grows over time, resist the temptation to increase your spending proportionally. While it’s important to enjoy the fruits of your hard work and allow yourself some luxuries, it’s also wise to consider how much you want to put aside for saving and investing. This balanced approach can help you build wealth and secure your financial future.
Financial planning is a long-term journey; finding the right balance between saving for immediate needs and future goals is crucial. Regularly reviewing and adjusting your plan becomes essential as your financial situation evolves. Remember that what works for you may differ from others, so conducting your research and seeking advice from a financial advisor or a trusted, knowledgeable individual is always a wise approach. Best of luck on your financial journey!
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The information in this post is only general in nature and is not personalised financial advice. Please contact us if you want financial advice.
