Judy – Lakewood High School

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NuVision’s 2016 Essay Challenge Scholarship

As many college students graduate this month, more than half of those graduates will spend several years paying off their amassed student loan. This has become a sad, yet unsurprising, seemingly inescapable burden placed on young adults. As a result, saving money among young people has become imperative over the past years. To become better savers, young adults should invest, manage their money wisely, and plan ahead.

Prior to the financial workshop, I knew a little more than most kids my age. My parents have taught me financial literacy since I was young which gave me some economic advantage: they opened a mutual fund account for me before I was six months old. As I got older they also opened at stock brokerage account with E*Trade and also opened a dividend reinvestment plan (DRIP) by sending $25 a month towards the purchase of Johnson and Johnson stock. A DRIP automatically deducts money from one’s checking account and uses that money to buy stocks every month.  Whenever I receive money for my birthday or Christmas, I would give the money to my mom and tell her which stock I would like to buy. Since grade school I have been getting paid as an altar server for weddings and funerals at our church. I get paid $10-$20 per event. The money I make is deposited to my savings account at NuVision Federal Credit Union in Lakewood. I use this money for my miscellaneous expenses.

The key to building wealth is a combination of making money, the element of time, a good rate of return while at the same time reducing taxes and inflation. How early should one start investing? The clear answer would be now while we are still young. For millennials, the amount of money needed for retirement is at least $2.5 million. The median age when a person begins saving is twenty-two years old. This, however, is not good enough and will not reach that $2.5 million mark. To reach this goal, it is important to spend only what is left after saving 10% of your income. Only in worst-case scenarios should one save only 5% of his/her income. My mom actually advocates using the 10-10-10 rule: 10% goes to retirement (long-term), 10% goes to investment (mid-term and short-term), and 10% goes to charity. She said it is important to help the poor and needy and it also helps us develop an abundance mentality. $10 saved a day with an 8 percent rate of return equals $500,000 over thirty years. It is important to decide where one should invest one’s money in order to get a higher rate of return.  It is also important to have an emergency fund to cover unexpected expenses. There will be always be this type of expenses: car repairs, home repairs, and appliance repairs are the most common. The emergency fund should be invested in a short-term fund such as money-market account.

Despite my experience and knowledge on saving money, I still learned something from the financial workshop. I learned that credit is also important to managing money. A person’s credit score reflects the person’s spending and paying habits. Paying bills on time gives a person a higher credit score which in turn gives that person a lower interest rate when borrowing money for mortgage or buying a car. The goal is to have a credit score of 750 or higher. I also learned about the importance of having life insurance especially if you are married and have a family. The amount of life insurance should be equal to the total of your household annual income, total debt including mortgage, and education expenses. For people who are not financially savvy, I learned the importance of having a financial adviser.

What will I do in the next 5 years to secure the future of my retirement? I plan on getting a part-time job during summer and hopefully a full-time job during my college years. The money will be used to pay for my educational expenses and will also go towards building my emergency fund and investment fund.  As soon as I get a full-time job, I will sign up right away with the company’s 401K plan and invest 10% of my income. If the company does not have a 401K plan, then I will open an IRA account. Just like my parents, I would also like to invest in rental properties and/or real estate investment trusts (REITs). Relying on my salary alone is not good enough. It is better to have multiple sources of income.

I would like to retire early because I would like to spend more time with my family and travel. I do not want to work until I am 70. When I retire, I see myself as having one years’ worth of salary in my emergency fund, with a 401K account of at least $2.5M, several rental properties, a business or two and a stock brokerage account worth at least $500,000.