by Gabriela Vasquez
Turning 18 in the financial world can open doors to new financial opportunities. Even as an underclassman you should be informed about your financial future. Some exciting things you'll be able to do include independently and actively participate in stocks, open a Roth IRA, create a credit account/build credit score, and so much more! I will be discussing important information you should be educated about involving Roth IRAs, credit scores, stocks and how to manage stress relating to these new financial burdens.
You may have heard your parents or grandparents talk about a Roth IRA; but what exactly is a Roth IRA. According to Schwab.com, “ A Roth IRA is a contribution of after-tax dollars, your money grows tax-free and you can generally make tax- and penalty-free withdrawals after age 59” (Figure 1). Now, this may be confusing at first so let's break it down. Let's say you get your $5,000 paycheck from work. You are taxed (for this example) 20% and are left with $4,000 in the bank. You put $500 in your Roth IRA which buys mutual funds, ETFs, and stocks. Over time when you add more money your Roth IRA will grow. In our example after 30 years your $500 will have turned into $704,275.29 (can all depend on stock market, contributions, etc). Now when you’re ready to retire above age 59, you are able to collect that $704,275.29 tax free (since you paid tax before your contributions). This is important for 18 year olds to know because the sooner you start adding contributions into your Roth IRA, the more money you will be able to collect for retirement.
Did you know the average American carres $6,194 in credit card debit (Cnbc)? No one wants to be in debit but many will find themselves in debit regardless as seen in figure 2. Credit card debit can be prevented easily. When you apply to get a credit card you are asking your bank to loan money. You will start off with a small cap of money and your cap will increase as you pay back your loaned money. A credit score is a score indicating how reliable you are to repay a loan. A good credit score can get you airline miles, higher spending caps, higher priority when applying for rentals,and insurance and other discounts. When you are 18 you can start applying for credit cards. When you get your credit card it is recommended that you use it for small items you can definity afford when your payment is due. The more you are able to pay back on time, the higher your credit score will be. Many people will not be able to pay back what they owe resulting in a lower credit score and credit card debit. Now that you are educated on why credit cards and scores are important, it is crucial to start increasing your credit score as soon as you can. Applying for credit cards and paying your credit card bills promptly is a good way to ensure a good credit score right off the bat and can increase your quality of life and get benefits.
Stocks can be a stressor for everyone. Majority of stocks can be predicted but what recent events have shown; the market can be very unpredictable (Figure 3) . Turning 18 means you can independently invest in stocks. When you buy the stock of a company you are simultaneously buying a share in that company. If the stock price goes up then you can sell that share for a greater price than what you bought it as. According to NerdWallet, the long term stock return is 10% which means if you invested $1,000 30 years ago it would be worth over $8,000 today. Investing in stocks can be a good way to grow your money. However, if the stock goes down then you also lose money. Investing in stocks with projected growth is a smart investment for any new investors (us). You must be smart with your money and do research on the history of stocks and others portfolios before you make an investment. The younger you are investing in the stock market, the more money you can ultimately grow.
All of these financial strategies can become stressful for many. Even just thinking about it might make you anxious. According to HelpGuide, “Financial problems adversely impact your mental health. The stress of debt or other financial issues leaves you feeling depressed or anxious”. Money is a very important factor in life and so it's important to treat it as so. Financial stress can lead to unhealthy positive feedback loops that can be hard to break the cycle as seen in figure 2. It is important to start off with healthy and smart choices so
we lessen the stress that comes from money. Even with most of us going to college soon, we have to worry about student loans, book prices, etc. It is important to have a budget and keep control of your money or your money will control you. You must create a healthy relationship with money by spending and saving wisely. When overwhelmed with financial stress, talking to a financial advisor might help you get support and advice. Keeping in check with your mental health and understanding when to ask for help is crucial.
In conclusion I hope this article has given you more insight on upcoming financial opportunities on how to grow your money. I hope you were able to create connections with prior knowledge and relieve questions you might have had. It is our responsibility to take care of our mental health and realize our financial stress to prevent unhealthy loops. I hope you’ve become inspired to take initiative into your financial future. Below I have linked helpful resources if you are interested further. How will you take the initiative of your finances? How will you manage financial/general stress?
What Is a Roth IRA? How Roth IRAs Work & How to Start One
Works Cited
Coombes, Andrea. “Roth IRA: How Roth IRAs Work, How to Start One.” NerdWallet, 2 Feb. 2021, www.nerdwallet.com/article/investing/what-is-a-roth-ira.
“Dealing with Financial Stress.” American Psychological Association, American Psychological Association, www.apa.org/topics/stress/holiday-money.
Lambarena, Melissa. “Credit Cards 101.” NerdWallet, 26 Jan. 2021, www.nerdwallet.com/article/credit-cards/credit-cards-101.
Little, Ken. “An Introduction to Stocks to Get You Started.” The Balance, 28 Nov. 2020, www.thebalance.com/introduction-to-stocks-3141368.
awhite_credit. “Alaskans Carry the Highest Credit Card Balance-Here's the Average Credit Card Balance in Every State.” CNBC, CNBC, 1 Dec. 2020, www.cnbc.com/select/average-credit-card-balance-by-state/.
This post was very informative for me as I am turning 18 soon. Although I am familiar with the stock market, I was not familiar with a Roth IRA, but now it seems like a great idea for saving for future purposes. Great job.
ReplyDeleteI liked that this post covered many different aspects of investing at a young age, even stress. I also liked that your sources were clearly shown in your post, and that you used and described the images in your post. I think the Roth IRA is a great idea for underclassmen to use to help prepare for College, and I think that Credit Card Debt is a serious problem which can easily be avoided if more people understood the differences between a credit and debit card.
ReplyDeleteI think this topic is very beneficial for this blog audience. As I am turning 18 in about a year, I stress just even thinking about how to manage my life more independently when I move on to college. So reading this blog, and learning new things from it such as Roth IRA that I have never heard before, definitely made me more aware and informed about this topic. I also love the fact that you have helpful links for your readers in case they want to look into this topic further!
ReplyDeleteCheyenne Kaatz - I really felt drawn to your post as I am turning 18 next year and want to be prepared as much as possible. I have heard stories from my sister of things she wishes she did when she was 18 financial wise. Your post was easy to read and since I didn’t know much about the Roth IRA and wanted to learn more about stocks, it was nice that you were able to explain it so well with your writing and figures that I now have a better understanding of these topics.
ReplyDeleteThis was a really great article to read, as it was relevant to most of the people within our classes and it really defined a lot of the driving questions that I had wanted to learn more about in this class. The rate that people will start accumulating debt is highly startling, with people 18-30 gathering an enormous amount of debt from auto loans, student loans, and credit cards (Urban Interest). It was also extremely interesting to read about the mental health aspect, as that is something that most people neglect from realizing until it is too late. Money is a really hard thing to manage sometimes, but to find ways to have it laid out better will be sure to help us all in the future.
ReplyDeleteThis topic was very beneficial to me personally because I am going to be turning 18 next year and I wasn't exactly sure how to handle all of this at such a young age. This blog really helped me, and I learned a lot of information about guiding myself away from financial stress and debt. Your post kept me very engaged and I liked the visuals you used, and it gave me a better understanding of the things you talked about!
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ReplyDeleteLove how concise and clear this post is especially about credit card debt and credit scores. One thing I'm a little is where could we get such financial advisors? Like you said although most of us are turning 18, other than our parents, we really don't have a third party to get a 2nd opinion and even paying for one/trying to find one might cause even more mental/financial stress. Overall this was a really informative piece!
ReplyDeleteThis topic was very beneficial to me personally because I am going to be turning 18 next year and I wasn't exactly sure how to handle all of this at such a young age. This blog really helped me, and I learned a lot of information about guiding myself away from financial stress and debt. Your post kept me very engaged and I liked the visuals you used, and it gave me a better understanding of the things you talked about!
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ReplyDeleteThis blog was very good for many reasons. It looked very professional and neat. I also liked how you covered many different aspects all in one blog. I knew a little before hand about the Roth Ira and investing when you turn 18 but what I didn't know and shocked me the most is what the average credit card debit is. That blows me away to think the average american carries a little more then $6,000 in debt. I have been $100 in debt to my dad and even that was stressful. I feel like part of the problems is that a credit card almost makes it to convenient to spend. At least for me I am way more likely to blow throw money on my card compared to if I have cash. But my guess is that it is different for everyone. My other question is that how bad are the taxes from the Roth Ira if you were to take it out before you retire or before the age of 59.
Turning 18 in the next few months so this is really helpful. Thanks for teaching us about Roth IRA.
ReplyDeleteI really enjoyed your use of statistics I thought it really helped to prove your point even further. I think it is so impressive how you were able to touch on 3 different financial topics all in one blog post without it seeming overwhelming. I also think you know your audience really well considering most of us are turning 18 soon if we haven't already turned 18 and these tips can benefit us right now or maybe in our close future. Great job.
ReplyDeleteYour post was super helpful because I was really confused on all of these financial opportunities that I can make at a legal age. I’ve heard my mom and close relatives talk about this stuff but I never understood all the different concepts of investing in stocks or having a Roth IRA ( I literally just learned what that was). This piece is extremely useful and informative for those that are confused about these things or haven’t had that much exposure to these financial opportunities. I learned a lot from this, great job!
ReplyDeleteThank you for your insight on this problem. I like that you mention that controlling your money is important because letting it go can be detrimental to your mental health. I agree that even thinking about some of these topics is anxiety inducing. I hope that the more I understand how to finance myself the less anxiety talking about money brings.
ReplyDeleteI never realized that people carry so much credit debit with them. This article definitely shows how helpful this class is being for us.
ReplyDeleteI loved this topic as it is about things that I don't really know. So thank you for this information. I am 18 and I didn't even know what the Roth IRA's were, and now I do, so thank you. I thought this blog was very informative and appeals to the audience really well.I also really liked the different statistics, I think they were a very helpful addition to the blog.
ReplyDeleteFirst off, I want to thank you for writing this blog because it has brought so much light to topics that I didn’t even know existed. Since I am turning 18 this year I felt that your blog has lifted a stressor off my shoulders before it even happened! The graphics really helped out with my understanding of these things. All in all, your blog gave me knowledge that I will most likely need in the future. Good job Gabi!
ReplyDeleteI really enjoyed the graphs and visuals you included, they were very helpful in adding more credibility to your arguments.
ReplyDeleteI did't know that I had to be 18 to open my Roth IRA or invest in stocks so now I don't feel as bad for putting it off. Also you can do doordash when you're 18 which can make like 20-30 dollars an hour. I think one of the issues is that people don't want to take the time to educate themselves financially I think the most important thing with regards to finance is having the motivation to develop your own financial education with out that any hope of living easy is gone.
ReplyDeleteGabi,before reading your post I really didn't know much about what was available for me. I'm turning 18 in about 19 days, so I can totally relate to feeling excited but also very stressed and nervous. Your post was easy to read and understand, and I appreciate how you broke up the chunks of information into smaller, easier pieces with graphs and other visuals. I never really understood credit scores before reading this either! Thanks! I feel less nervous now.
ReplyDeleteIt surprised me how much money you can make from a Roth IRA in 30 years. I think that to be financially successful it is very important to invest your money, where it can make more money for you without you needing to do anything. Even if you have only a small amount of money to invest, you should invest because it can grow to a lot over time. As you mentioned, you need to stay financially healthy to avoid other issues. Investing you money and letting it grow for you, can help you to stay financially healthy.
ReplyDeleteFinancial stress can directly affect your mental health. You may be restricted to obtain certain things because of your current financial state, but your physical health should never be affected. For us, students at least, take care of your body. Your physical wellness will lead to many beneficiaries. When we exercise we release happy hormones and our attitude will change and we will feel more positive. Exercise, in turn, is the first step to improving your mental health. Which will help your financial decisions.
ReplyDeleteI feel as if a lot of 18-year-olds and similar age groups overlook their potential financial stress that could come if they're not careful. This article made me realize that it's important to keep track of your finances in order to combat this potential stress, as you can get yourself into a financial hole if you don't. The visuals were also a great touch to this article, especially the financial stress cycle, because it allowed me to further understand how financial stress can develop. Good job.
ReplyDeleteAs an 18 year old, I find it difficult to prioritize what needs to be completed when. Outside of assignments, there aren't real deadlines to set up your future. For instance, setting up a Roth IRA. I often have no clue where to start. But you've provided a lot of information on what's out there and how to start, and it'll be extremely helpful.
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