You’ve heard again and again about saving money and planning for your future. Most seniors at Black Hills High School are turning 18 and preparing for their post-high school life. One thing that students are thinking about is how they will make money for themselves. Regardless of where you get your money or what kind of job you have, every student should pursue a plan for budgeting, investing, and building credit. After all, these habits will help you later on when you want to apply for a loan or invest in yourself.
When you open a new bank account, there are dozens of numbers and fees to wrap your head around. Sometimes, it’s better to just keep it simple. For young adults just getting started, there is no need for complicated banking systems. For this, I recommend Simple. Yes, Simple. Simple, as the name implies, is a simple banking system that you can easily set up in 10 minutes through the Simple App or the website. Simple is a relatively new, modern banking service out of Portland Oregon. They take a new “millennial” approach to banking, and I strongly recommend them over traditional banking. At the moment, Simple will allow you to open an account and use a debit card with them. There are a few defined features that make Simple really fun to use. Simple offers a goal setting feature that will allow you to save chunks of money by subtracting from your “safe to spend” pool of money. Simple also allows you to send money directly to other Simple users and send checks. You can deposit checks, pay bills, and receive direct deposits as well. Simple is only a basic checking account though. If you’ve never had your own bank account, this is a great place to start because you can easily wrap your head around everything and work from an App on your phone. If you’re interested, check out the link below to their site.
Investing Your Money
Do you have a stock broker? Probably not. I don’t think you should get one either. Depending on how much money you have and particular brokerage fees, you might find yourself barely breaking even by owning a few mutual funds. Luckily, there is a better way to invest your money. Wealthfront! Wealthfront is a new investment platform out of San Francisco that uses AI to manage your money. Now before you worry about AI, consider this; AI has been used for a long time in the financial industry behind the scenes for years. Big banks use it all the time to manage their money and optimize growth models. The advantage to AI investing is that you don’t have to pay anyone to manage your money and it operates 24/7 globally. Wealthfront will manage your money for free if you have under $10,000 invested. If you have over $10,000 you will only be charged 0.25% annually on your money to invest. If you don’t have any experience with brokerage fees, that is incredible. In addition, you’ll be asked to fill out a risk profile on your investment portfolio. Your assets will be diversified accordingly within the program. Once you deposit enough money to worry about taxes, Wealthfront will manage your money with a tax-loss harvesting algorithm which will effectively help you pay less in taxes by writing off your losses, but if you’re in high school, don’t worry about that yet. Wealthfront is another easy one to set up. You just connect your bank account and verify your identity. There is an App, but I recommend facilitating setup on their website where it’s easier to understand what’s going on. If you call their support line, you’ll talk to a nice agent in San Francisco to help you out. Wealthfront supports various types of investment accounts including variants of IRA and Custodial accounts, ETC. Check out Wealthfront below.
Another way to invest?
Yes, Wealthfront requires a minimum of $500 deposit. If you’re not prepared to let go of $500 for the long term, you might opt for another option. One of those options is Acorn. Acorn is an app you install on your phone and link to your bank account. Acorn will look at all your debit transactions and round them up: $2.30 to $3.00, $5.57 to $6.00 etc. The difference between the round dollar and the original price, is how much Acorn withholds from your account and invests. Once you set it up, you can choose from several generalized options and mutual funds to invest in. This is easier than Wealthfront if you don’t have any capital. Every Time you buy a latte for $4.25, $0.75 cents will go into your acorn investment account! Maybe when you get $500 in your Acorn, you can transfer to Wealthfront.
Build your credit
Don’t max out your credit card and swim in debt. The good news is that you won’t have access to a credit card to max out because you probably won’t get one if you apply. Credit card companies look at your credit score to decide whether you qualify for a card. The problem is that if you don’t have a credit card, you can’t build credit! I know it sounds unfair. The best way to build credit is to apply for a secured credit card that reports to credit agencies, or apply for a credit card with a local credit union. Before you do this, understand what a secured credit card is. If your credit card is secured, you pay a deposit to open the card, and then they use that deposit as collateral on your payments. Your deposit is also your credit limit. Before you apply for a credit card, make sure you have a job with several months of documented income. When you have income and a deposit, go apply for a credit card! The idea of your first credit card should be to buy small things and pay them back on time to build your credit up. If you do this, you’ll have the opportunity to apply for a better credit card with a higher limit and benefits in the future. Remember not to spend over 35% of your credit card limit, because even if you pay it back, it will count against your credit score.
Check out NerdWallet for great advice on credit cards.
By Max Parker, Editor