Ask Paul: I'm investing, saving 70% of my income and I'm 16
I am a 16-year-old wanting to plan for my future.
Between my two casual jobs, I earn between $150 and $250 a week. I save 70%, putting $20 a week in my super (enough to claim the maximum government co-contribution) and the rest in a high-interest savings account.
I also have an InvestSMART high-growth account into which I put $100 a month. Given the current market and my age, what would you recommend I do with the remaining money I have?
Or even could you propose a change to my current strategy? Thank you. - Praneel
Goodness, Praneel, are you really 16? You have the money brain of an experienced adult investor!
You outline quite a few of the essential rules of money.
You cover: rule 1 - spend less than you earn; rule 2 - save on a regular basis into growth assets, which you are doing through super and your InvestSMART high-growth account (disclosure, I am chairman of InvestSMART); rule 3 - let compound returns do the hard work for you; and rule 4 - use dollar-cost averaging through regular investment.
Pretty damn good for a 16-year-old. I'm not even going to mention what my money skills were like at 16 - after your words I am too embarrassed.
All I can say is that I would not add more to your super contribution. Super is a brilliant investment, but you have more than half a century to retirement. I have no idea what super legislation will be like that far out.
A simple option is to add more to the InvestSMART fund (or any other low-cost fund). As you know, markets have gone backwards lately. Sure, they may go lower but there is more value in the market today than there was three months ago.
You need flexibility when you are young, and investing outside super gives you this.
But, really, Praneel, you are all over money already. Stay on your current path.
What I'd like to do, if it was possible, is buy shares in you. You are destined for financial success.
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