I came across this interesting profile from MarketWatch where a 12-year-old with $20 in her account wants to start investing in the stock market. However, everything she’s learned about investing in school has her using software where $500,000 of play money is provided.
So since she’s not in the best starting position, she wanted to know how she can get started. Fortunately, contributor Quentin Fottrell has some sage advice for this aspiring investor.
As an underage child, she needs to open up a custodial account under one of her parents. This is part of the Uniform Transfer to Minors Act (UTMA) that allows the child to take full control of the account once they reach adulthood. Depending on the state she lives in, this age will either be 18 or 21 years old.
Moreover, there are several brokerages that provide full support of custodial accounts. No trading fees, no minimum fees, no annual fees, and no penalizing fees for inactivity. Literally the perfect start for any cash-strapped kid who wants to get an early head start on their finances.
She can try to get some of the funds herself, but she can also ask her parents to chime in with some money. Quentin’s colleague even suggests the following super-simple strategy for acquiring nearly $50,000 by age 25 without her having to touch the money:
“Let’s pretend that you have a child who is 11 years of age, and you invest $2,500 for him or her in an index fund, along with regular investments of $100 a month (starting the first month). Using the future value formula in Excel, with an assumed annual 10% return for the fund, after 168 months (or 14 years), when your child is 25, he or she will have $46,460.28 in the account.”
Once the fund builds up, Quentin recommends the little girl to start looking at individual stocks that she likes. Perhaps something that aligns with what her personal interests may be, or what she believes will be valuable in the far-away future.
What can I say? I think it’s phenomenal that children are taking a strong interest in personal finance at a very young age. I certainly wish that I had this information when I was a know-nothing kid approaching my high school years.
This girl will be one of the few Americans who manages to separate herself from the majority. And by that, I mean setting herself up for financial success far earlier than when 99% of people get started.
You have the same opportunity to provide your children with the same head start. Don’t waste it.
But I’m curious to know: If you could give your kids ONE piece of financial advice that they had to follow for the rest of their lives, what would it be and why? Reply to this newsletter and share your wisdom with us!
Be VERY Careful of Following Viral Advice on Online Platforms Like TikTok!
I’m sure you already know this, but it bears repeating: Just because financial advice goes viral on the Internet DOES NOT mean it is necessarily good advice.
A good example of this is the social media app TikTok. One user @kingzippy, known as Tommy Zippler in real life, posted a video that contained the following advice:
“Buy several credit cards with different due dates. Max out spending on the first one, use another to pay it off, and then repeat with a third and fourth and so on to live off debt forever.”
This demonstration of sheer idiocy was viewed over 430,000 times and was distributed to his audience of 1.6 million followers. Even he knows it, as his profile says that all his videos are jokes:
“I know it’s not possible, but I also knew that people would fall for it and think it would actually work. It just shows how easy it is to spread fake information on TikTok. I think some users might actually try it. Hopefully they don’t.
It went viral because TikTok has a very young crowd, and everyone’s always looking for that fast money and easy way to live, let alone live for free. Everyone loves a shortcut in life.”
But people don’t see that disclaimer. And many of these so-called personal finance gurus put additional disclaimers stating that they are not liable for any consequences that arise out of people following their advice.
Frankly, I would avoid TikTok for ANYTHING related to the topic of finance. It’s nothing but a bunch of fake 20-something “millionaires” offering courses on trading stocks for $300. Sure, the concepts might be digestible and entertaining to soak in via the platform’s 60-second videos, but that comes at the heavy cost of being heavily misinformed.
And this is not helped by the fact that TikTok’s primary demographic is 13-24 year olds. A great age to start learning about personal finance, but a VERY bad platform to take financial advice from….
How One Army Vet Paid Off Her ENTIRE $87,000 of Debt in 2020 Alone
36-year-old army veteran and single mother of three Nyajuok Mangongo was having a bad 2019: PTSD from her overseas mission, combined with a nasty divorce and $87,000 in credit card debt, left her searching for answers in September 2019. At that point, she made a promise to become debt free by the time summer 2020 came around.
And apparently… she was able to pay off the ENTIRE debt in less than a year. Here’s how she did it:
- Her Army salary was $7,200/month after taxes, which would expire at the end of June 2020
- She took three 12-hour night shifts on Friday through Sunday at a local hospital, getting paid $63/hour
- She sold a LOT of items in her house, sometimes making extra hundreds of dollars per month
- She set up two new income streams: A referral compensation with a company called Team National, and reselling cheap items she bought from Goodwill on eBay
- She significantly lowered her expenses, using a spreadsheet to budget out her monthly costs
- Lastly… she had a WHOPPING $17,000 check come in from 60 days of paid leave she hadn’t used during her time serving the Army
Now, I have to be honest here. This is an extraordinary accomplishment, but you also have to remember she has some very lucky opportunities come her way.
Not everyone can simply “pick up” shifts at a hospital paying them an hourly wage that would equate to a near-six-figure income. And that was ON TOP of her lucrative Army income when taxes were factored in.
I’m not here to downplay her accomplishments, but it’s always important to get the full context behind these types of stories. Keep details like this in mind the next time you hear fantastical claims of paying off large amounts of debt in short periods of time.
Down Goes the Dollar, Up Goes the Euro!
This little piece is a treat to anybody who trades in the foreign exchange markets or has a strong interest in worldwide currencies.
Technical analyst Andrew Addison recently penned a piece on Barron’s predicting that the US dollar will continue to fall in value. As a result, your next trip overseas in 2021 may be more expensive than you thought.
To sum up his predictions… the US dollar is set for more downside, while other currencies are looking to enter a new bull market:
“From its March peak, the US Dollar Index has lost more than 12%, and just since the election, the index has declined approximately 4%. Investors are concerned that the cost of helping consumers and businesses recover from the pandemic will lead to higher taxes and a bulging Treasury financing calendar, as more Treasury bonds will have to be auctioned to meet growing financing needs
Since Nov. 2, the New Zealand dollar has surged 7%, the Australian dollar has climbed 5.5%, the Korean won has advanced 4%, and the Chinese yuan has risen 2.5%. And their economies are likely to experience faster growth in the year ahead than the US.”
Addison chalked this up to the failures of the United States to contain COVID-19 in comparison to the other countries. For this reason, he foresees these international economies recovering much faster, and thus their currencies will start to increase in value.
Something to think about for the future of the American stock market!
The Surprising Connection Between Your Credit Card Score and a Fully Paid-Off Mortgage
The Motley Fool contributor Christy Bieber came across a shocking discovery after being financially responsible: Once her mortgage loan was fully paid off, her credit score went down by 11 points.
Now granted, she already had a respectable credit score and this decrease wasn’t going to be a deciding factor in her ability to get good loans in the future. But after further investigation, it turns out this drop in score wasn’t a glitch or a conspiracy:
“First, when I paid off my mortgage, that eliminated one type of credit from my credit history. Having different types of credit is one of the key factors that determine your credit score, along with payment history, age of credit history, amount of credit used, and number of inquiries on your report.
The second issue relates to the amount owed in proportion to the amount borrowed. Your credit score is higher if the loan balances you owe are small compared to the amounts you borrowed. And my mortgage was helping with that.”
In other words… it is beneficial to show lenders that you can consistently cover the full payments for several loans over a long period of time. Weirdly enough, this is proof that you can make timely payments on a monthly basis.
It’s a great heads-up for any of our readers who are inching closer and closer to fully paying off their mortgage. Who knows – maybe it’s time to get a second credit card!
Mental Health in America Just Keeps on Getting Worse and Worse…
Mental health is one of the most talked-about topics in America, and yet it appears to be getting worse as time passes on. This is made evident by a recent Gallup poll surveying the emotional well-being of Americans:
- From 2019, there has been a 9-point drop in the percentage of Americans who rate their mental health as “good” or “excellent” (42% to 34%)
- In 2020, 18% of Americans described their mental health as “fair” while 5% described it as “poor”
- Those with mental health conditions are 65% more likely to be diagnosed with COVID-19
COVID-19, the 2020 Presidential Election, worsening race relations… all of these are major factors in making America a country of the mentally insane.
But you want to know the sad part about all of this? Mental health will become an INCREDIBLY profitable venture for companies and startups, but for all the wrong reasons.
So let me ask you: How is YOUR mental health doing nowadays? Are you hanging in? Reply to this newsletter and tell us how you’re feeling lately!