16 Y/O - How to Invest 1k?

Need a dollar on 17/06/2015 - 18:24

Hi everybody,

Before I start, I am 16 years old, and I have one grand saved up (and growing). I am with CBA.

It is a small amount to many but, Is it worthwhile to invest? If so, should I invest in shares in a major bank (obviously parents would have to do this) or term deposit, etc.
I am new to all this, I just want to know what's best for my money, is it worthwhile or should I just hang onto it? I remember my maths teacher briefly talking about compound interest and I was interested but now I wish I paid more attention in maths.. :P Need advice..

Thank you. :)

Financial

Comments

  • cycleri3 on 17/06/2015 - 18:56

    UBank savings account. Do you deposit at least $200/m If you do then you get bonus interest. You can still take it back out and spend it).

    • Need a dollar on 17/06/2015 - 19:11

      Interesting. Will read into it. Thanks!

  • Heizenberg on 17/06/2015 - 19:03
    +4

    At the moment 1k is probably not worth your time to look too much into investments. For now at least you would probably be best looking for a bank account with the best interest rate and just keep working at it and down the track think about investing.

    Basically with compound interest you will earn interest on interest. For example @3% on 1k, in a month you will earn $2.50. (1000*(.03/12))

    So next month you will earn interest on $1002.5 + any money you add. and this continues every month.

    • Need a dollar on 17/06/2015 - 19:11

      Thanks for clearing that up, yea thought it was a bit minuscule to start with.

      • sickllama on 17/06/2015 - 21:23
        +5

        It is a big accomplishment for anyone who is only working part time, and a huge accomplishment for a 16 year old given how little per hour minimum wage is for that age.

        Be very proud that you're developing saving habits so young!

        I agree with other posters that you should look into uBank. Its owned by the NAB (one of the biggest banks in Australia) and is therefore IMO very safe. You can also access it easily should you wish to spend some of it.

        If you're interested in investing, start doing some research into it. What ever suits your leaning style: visit moneysmart.gov.au, read a book, google, investipedia it, enter a stockmarket game (where you invest using real prices, but fake money), read a magazine, business section of a newspaper, sign up for a free online course (udemy, coursera come to mind).

  • bray77 on 17/06/2015 - 19:53
    +1

    1K is not much, you're right, but what's important is you are interesting and willing to participate in investing.

    What I would suggest (and did at your age) is read lots of books on investing priciples, property, building wealth etc. Set yourself a goal, say 5K of free money that you're happy to invest with. Get a goal saver account with the CBA and chuck some money in there, then when you reach your goal, you'll know all about ETF's, managed funds, bonds, property and the like.

    Good Luck mate :)

  • niknah on 17/06/2015 - 20:19
    -5

    Put it all in super and the government will put in an extra $500 for free!
    Starting your super at 16 and contributing every year will do amazing things, use any compound interest calculator to see.

    • Heizenberg on 17/06/2015 - 21:31
      +3

      yes but he can't access it for a long time. Who knows if it will even still be there when he can access it.

      • Cheeper on 17/06/2015 - 23:45

        Super can be a good investment but when you have so long to go before you can access it maybe not?
        The govt will most likely will screw with it and make a mess of it by the time your time comes.

        • Heizenberg on 17/06/2015 - 23:56
          +1

          yeah thats what i think. if you're a few years from retiring, salary sacrificing into super to minimise tax etc can be a good thing but this far out its not worth it.

    • SlickMick on 18/06/2015 - 08:29

      Just for a bit of balance, super is the most tax-effective vehicle to save or invest. Yes rules change, but I can't see them ever making super unattractive.
      The only true downside is that you can't touch it for a very long time, but the point @niknah was making is, that's actually an upside. $1000 invested for 60 years is going to be pretty sweet when you retire.

  • Unorthodox on 17/06/2015 - 20:42

    That's not much to go spending on investments unless you did it with your parents etc (who will pay for brokerage or any transaction costs).

    Do you have a job or any sort of stable income such as allowance?

    Avoid term deposits at this point and stick to high interest savings.

    I was like you at 16, had about $700 and now around 40k at 20. (Although I started spending more independently since 18).

    Keep working at it as each bit adds up, and you'll then gain more in interest.

    Also, keep your money liquid, you're at an age where you'll spend money so throwing all your money into shares etc isn't a good idea.

  • Diji1 on 17/06/2015 - 20:51

    Ah yes compounding interest, the 8th wonder of the world…

    http://www.fool.com.au/2011/07/08/how-to-invest-500-1000-and…

    Invest $1000 in an index fund with minimum fees and add to it, never withdraw. If you just left it for 30 years you can retire quite comfortably.

    www.businessinsider.com.au/amazing-power-of-compound-interes…

    Note the earlier you start the more "magic" a compounding investment has.

  • altomic on 17/06/2015 - 21:04

    when I was 16 I bought a Jeffrey Smart limited edition hand coloured + signed lithograph for $1000. it's now valued around $10,000.

    sure, nearly 25 years later, it's value has only increased 10 fold. but it's something that hangs in my lounge and that I enjoy.

    • PVA on 17/06/2015 - 21:13
      +1

      valued at $10k for insurance replacement but probably could only sell for $5k! :)

      (I know from a painting we have)

      • altomic on 17/06/2015 - 21:54

        valued as per sales records of the same lithograph.

        • PVA on 18/06/2015 - 09:41

          Yep, that's what I mean. Retail is that price but what you get for it if you sold would be half. Even if you auction it and get 10k 30% goes back to the auction group.

  • [Deactivated] on 17/06/2015 - 21:06
    +3

    Booze and hookers.

    • Cheeper on 17/06/2015 - 23:46

      LOL… get interest in the form of a hangover and the clap.. :-)

  • ilsan0 on 17/06/2015 - 21:06
    +2

    On Red mate.

    just kidding: )

  • PVA on 17/06/2015 - 21:11

    As you know it isnt a massive amount but it is for you.
    you are with the commonwealth, so open a youthsaver account and plonk it there, make sure you add an amount and no withdrawals every month and you get bonus interest for that month. at the moment its 2.90% pretty good for $1000.and no fees either cos your a kid!
    https://www.commbank.com.au/personal/accounts/savings-accoun…

    that should do you until you are 18.

    • [Deactivated] on 17/06/2015 - 21:35

      $60 after two years, meh

      • PVA on 18/06/2015 - 09:43

        But what do you expect for $1000, remember most other options will have fees etc.

  • echelon6 on 17/06/2015 - 22:38

    buy some call options.

    • Peanut money on 17/06/2015 - 23:02
      +2

      You mean something like phone cards :)

  • ozibargainer on 17/06/2015 - 23:30

    You can do some research into investing it in Gold. It has its own risks but usually its worthwhile if you look at long term investment. Buy a gold biscuit & leave it alone for some years.

  • retiredfeline on 17/06/2015 - 23:55
    +1

    Eneloops of course. :)

  • Pumpkin_rrr on 18/06/2015 - 08:47

    Big applause to a nice young person. $1000 might not seem much to a lot of people but it is a really good start. My favourite saying: where you start is not where you finish.
    The government used to give incentives to young people to save to buy home. Unfortunately they have stopped this I think. https://www.commbank.com.au/personal/apply-online/download-p…

    Perhaps you can buy some shares now and watch it grows. The trick is to find a stable one with good growth. That's what I do with my spare cash nowadays.

    On the other hand, do not become a slave to money; at your age you can have some fun and learn at the same time. Travelling is good and I cant put a price to it. You will remember your travel experience for the rest of your life.

    Good luck.

  • bokka on 18/06/2015 - 10:01

    I would not put it into a savings account. We are going to have sustained levels of low interest rates, and your real yield is going to be very small.

    Put it into a share index tracker, an Exchange Traded Fund (wikipedia it). You can purchase the full $1000 worth of ETF shares with one $15 trade using an online brokerage account. Yields on the ETF will be similar to current savings account, and you will get capital appreciation if you ride out the short term fluctuations.

  • pascher on 18/06/2015 - 10:57
    +1

    The above all have some very good points.

    If you pay attention to a lot of news sources you will be able to see that the way large companies make real money is by avoiding tax and shifting profits and earnings off the books.

    I want you to consider this proposal with your current money. If you are sixteen you most likely still live at home and with your parents.

    As most people living in a house have a mortgage, I assume your parents have not yet paid this off.

    Your parents will be paying about 5% (round figure) per year on this money at a compound monthly rate. Propose to them that you can give them this money in trust that they will pay you the interest they save and you have access to it through the redraw at any time.

    This kind of investment is risk free assuming you don't sh1t your parents off too much and will get your head around how you can subvert and shift earnings and profits around to your benefit later on in life.

    Have a look into compound interest rates as well as term deposits. But I feel that if you are just looking for the maximum return this would be the best way for the benefit of you and your family.

    Plus you helping to grow your family wealth should only benefit you in the long term, not just in monetary ways. Financial pressures of montage and repayments have associated stress. Showing that you can contribute to alleviating these within the family would demonstrate an understanding and maturity well beyond the normal 16yo.

    Notably. Do not do this with the whole amount. Spend a portion (25% on something of good quality and value that you will use and appreciate.) this way you get your own life balance too.

    Hope this helps. I was 20 before the penny of this realisation dropped for me.

    • Doggiie on 18/06/2015 - 22:57

      I agree with you. I am 20 and I have been doing this for almost a year now. Although it may take some time convincing uneducated parents the concept of this (which most banks capitalise on).

      Rather than letting my parents pay the 4.75% p.a. on their loan and myself earning 2.25% p.a., which effective means I am paying 2.5% p.a. of my own money to my bank… say whattttttt?

      But yeah, they only yielded to my side of the argument when they realised that I am not a 5 year old they have to shelter anymore.

    • Need a dollar on 20/06/2015 - 00:12

      Thanks for the advice, but our house has been fully paid off fortunately.

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