right arrow
Informational Message Stay on top of the information you need to navigate the admissions process amid the COVID-19 pandemic. We've got articles, videos and forum discussions that provide answers to all of your test prep, admissions and college search questions.   Visit our COVID-19 resource page.

Introducing Kai!
Your College Confidential guide bot.


Kai can provide tips and support as you research and apply to colleges, and explore majors and careers.





Chat with Kai
here, 24/7!


or Skip Forever

Finding the right college for your unique situation can be challenging. Hear from other students who shared their admissions story. Download our FREE Student Voices - vol. 1, Student Voices - vol. 2, and Student Voices - vol. 3 eBooks NOW!
PARENTS4PARENTS: AfroPuffMom is the mother of two boys, a college junior and a high school junior. She has extensive experience reviewing applications for high-achieving, first-generation students. ASK HER ANYTHING!
Make sure to check out our September Checklist for HS Seniors. Consult these quick resources to get you started on the process this month.

Financial/Investing advice for your kid

mathmommathmom 33321 replies163 threads Senior Member
edited July 23 in Parent Cafe
So my younger son apparently thinks he has too much cash on hand and wants to talk to us about investment advice. He's in the Navy and I believe he squirrels away the maximum they allow, but not the one where you have to spend 20 years to get the full pension. We'll ask again when we talk to him. Generally my advice has been maximize whatever you get from your work place. Put it in a Roth IRA. Index funds are the way to go. Live within your means. Pay your credit card every month.

When I was his age or a little older, I really liked Jane Bryant Quinn's Making the Most of your Money. Would love to give him something similar.

I have no idea if he should be worrying about Covid-19's eventual effect on the stock market. I don't understand why it hasn't crashed yet!
edited July 23
57 replies
· Reply · Share
«13

Replies to: Financial/Investing advice for your kid

  • 1214mom1214mom 5489 replies198 threads Senior Member
    Hopefully he’s putting money in the TSP, and if he’s a fairly low rank he should be putting it into the ROTH TSP (in my opinion).
    I agree on the crash - as I’m sure you know it went way down, but is back up substantially.
    Bogleheads is an excellent financial advice form and they have lots of articles/wikis for various situations.
    · Reply · Share
  • kjofkwkjofkw 964 replies96 threads Senior Member
    We believe in dollar cost averaging. (Our current financial planner doesn't, but we never fully understand the reasoning). If he is going to invest, I think it better to add slowly, especially now as the market is unsteady.
    · Reply · Share
  • rickle1rickle1 2760 replies23 threads Senior Member
    1. Time in (not timing) the market
    2. Dollar cost average
    3. Asset allocation based on risk tolerance AND rebalance to risk tolerance
    4. Pay yourself first (do without other things. Don't do without investing)

    30 yrs from now he'll be very well off with or without crashes.
    · Reply · Share
  • ucbalumnusucbalumnus 84683 replies753 threads Senior Member
    rickle1 wrote: »
    4. Pay yourself first (do without other things. Don't do without investing)

    Related is avoiding spending creep if income increases.
    · Reply · Share
  • mathmommathmom 33321 replies163 threads Senior Member
    I must say, I'm impressed with my kid. Apparently he's saving half his salary. :)

    He'd like to buy a house sometime. I actually ended up thinking about laddering CDs for at least some of his extra cash as he should have an emergency fund that he can access. The penalties for cashing in CDs early (which would only be necessary in a serious emergency) should be minimal. He's going to look into whether he can have a Roth IRA outside the TSP plan.
    · Reply · Share
  • zeebamomzeebamom 1440 replies3 threads Senior Member
    I have a friend who is working as a contractor to the DOD providing financial guidance to people in the military. She has been a broker and a fiduciary/self employed financial advisor with all the usual qualifications for many years. It’s possible that such a person is at his duty stationer is available for remote discussions.
    I think she’d be amazed at his savings and desire to do more with it. (Some of the general stories she’s told of service members who have nothing but a huge truck, living beyond their means, massive credit card debt, etc. would astound you.)

    · Reply · Share
  • ucbalumnusucbalumnus 84683 replies753 threads Senior Member
    mathmom wrote: »
    I must say, I'm impressed with my kid. Apparently he's saving half his salary. :)

    https://personalfinancedata.com/compare-savings-rate-rest-america/?savings_rate=50 puts him in the top 7% of Americans in terms of savings rate.

    That site says that the median savings rate is 13.8134% and the average savings rate is 8.2%. It also says that 0% savings rate is higher than 38.18% (meaning that 38.18% spend more than their income), and -100% savings rate is higher than 12.28% (meaning that 12.28% spend more than double their income).
    · Reply · Share
  • happymomof1happymomof1 30955 replies199 threads Senior Member
    Navy Federal Credit Union is likely to have decent free financial advising available for him if he's a member. That would be another place for him to start.
    · Reply · Share
  • MomofJandLMomofJandL 2147 replies41 threads Senior Member
    Not sure CC will allow a link to the ****, but I printed out a copy of Dr. William Berstein's "If You Can" for both my kids. Or you can google it and send him a link. It's a great primer, and my kids didn't want to hear me talk about investments but they have asked questions that let me know they read the document.
    · Reply · Share
  • kiddiekiddie 4000 replies251 threads Senior Member
    Right now for a young person I would recommend keeping your non retirement savings liquid. There really aren't any good short term investment options right now - the stock market is risky and CD rates stink. The advice I have given my 26 year old daughter is to put her 401k into long term funds and her other savings are sitting in FDIC insured bank accounts. She was able to snag a few good rate CDs late last year, close to 3%, but those have disappeared. My hope is that when the rates rebound she can easily move money into CDs. I am following a similar strategy. Any CD that has come up for renewal recently I have put into the shortest term possible (6-7 months) and hope that at maturity rates will be better. I will keep renewing short term until the rates improve.
    · Reply · Share
  • Madison85Madison85 10421 replies412 threads Senior Member

    Of course a federal government employee can have a Roth IRA as well as a TSP and maximize both considering income limitations and the backdoor Roth technique if necessary.

    The GEHA HDHP is also a way to save more. For single only coverage the premium conversion of $900 annually goes into HSA Bank ratably throughout the year. To max out, the employee can then contribute $2650 through payroll straight into a Fidelity HSA (all at once or over the year).

    Note that you don't want to reach the TSP max ($19,500 for under age 50) before year end and miss out on the 5% match.

    Don't let the TSP monies just sit in the G fund. Some sources recommend 80/20 or 87/13 for C and S funds.
    · Reply · Share
  • mathmommathmom 33321 replies163 threads Senior Member
    Thanks for all the comments and feel free to keep them coming. I found the TSP stuff confusing - he mentioned how he had to be careful not too put too much into the TSP which seemed odd to me. I think he has them in some sort of fund that is pegged to your age. Agressive now, less agressive when you get old.
    · Reply · Share
  • Madison85Madison85 10421 replies412 threads Senior Member
    @mathmom The 5% match stops if the employee contributions stop so he wants to avoid maxing out the $19,500 before year end.
    · Reply · Share
  • PublisherPublisher 11914 replies161 threads Senior Member
    If he doesn't mind less diversification & likes to participate in the market, consider buying a blue chip stock which pays dividends and selling covered call options to enhance yield--but will limit upside potential. Verizon would be an example of such a stock.
    · Reply · Share
  • ucbalumnusucbalumnus 84683 replies753 threads Senior Member
    mathmom wrote: »
    I think he has them in some sort of fund that is pegged to your age. Agressive now, less agressive when you get old.

    It seems fairly common these days for retirement savings plans (401(k) and similar plans) to offer target date investments (where the investor chooses the one with a year closest to intended retirement year) which gradually change the asset mix to be more conservative as the target year gets closer.

    Target date mutual funds are also offered by many of the usual companies (Fidelity, Vanguard, Schwab, etc.) to individual investors for regular or IRA accounts.
    · Reply · Share
  • TdoesCollegeTdoesCollege 183 replies1 threads Junior Member
    edited July 25
    mathmom wrote: »
    Thanks for all the comments and feel free to keep them coming. I found the TSP stuff confusing - he mentioned how he had to be careful not too put too much into the TSP which seemed odd to me. I think he has them in some sort of fund that is pegged to your age. Agressive now, less agressive when you get old.


    @Madison85 hit it on the head, I think. It’s about being sure to spread the payroll deductions out so that you make contributions from the entire year’s worth of paychecks without exceeding the annual limit, to maximize the match. This can be true of other plan types as well (401k, etc). I remember watching my contributions closely.
    edited July 25
    · Reply · Share
  • Madison85Madison85 10421 replies412 threads Senior Member
    Federal employees can learn alot about the pay and benefits by reading the document (available free for the first year, $20 in a subsequent year) at fersguide dot com.
    · Reply · Share
  • 1214mom1214mom 5489 replies198 threads Senior Member
    @Madison85, it looks like even the first year has a fee now.

    It is true you need to be careful and not over-contribute to keep matching coming, but he may also have things he wants to save for that are NOT retirement, so other options are great also.
    · Reply · Share
  • Madison85Madison85 10421 replies412 threads Senior Member
    edited July 26
    The information below in quotes is from the last paragraph on the main page.

    "If you are a new federal employee hired in the last 12 months, you can obtain a free FERSGUIDE subscription to help you start your federal career out right. Just email us your name, preferred email address, agency name, and your EOD to [email protected] and you will receive an email from us with a username and password good until 11/30/2020)".


    @1214mom
    edited July 26
    · Reply · Share
Sign In or Register to comment.

Recent Activity