Save for College First
Dear Dave,
I'm 17, and my personal finance class at high school has been watching your course. I want to begin investing early to take advantage of compound interest, so I want to start a Roth IRA. Which mutual funds would you advise investing in while I'm still trying to save for college?
Jeff
Dear Jeff,
I love the fact that you're thinking ahead, but I want you to save for college before you worry about investing. The best investment you'll ever make is an investment in you, and that's exactly what college is all about.
Now, if having money for college isn't a big issue, you can go ahead and begin putting a little bit of money into a Roth IRA. You can put as much as $5,000 a year into one, but the great thing is that you don't have to put that much into one. It would probably be pretty hard for you to invest to that extent while you're still in college, anyway.
When it comes to a first mutual fund, I'd suggest a simple growth-stock mutual fund. They're pretty calm, and they will do some great things if you can find one with a good, long track record of success!
Dave
Mid-cap growth vs. mid-cap value
Dear Dave,
I'm looking at allocations for my mutual funds. What's the difference between mid-cap growth and mid-cap value?
Jason
Dear Jason,
For purposes of allocating, a mid-cap is a medium-sized company. Generally, these fall into the growth stock mutual fund category. Try thinking of value funds this way: Let's say you buy an expensive home in a good neighborhood. It's okay that you paid a little more, because it's a good area, and you're just going to wait things out. It's that kind of value mentality versus bargain hunting and trying to get a great deal.
When it comes right down to it, the differences in the two types are small. I'd go with whichever one has the best track record and rate of return. Regardless, always remember to spread your money across these four types of mutual funds: growth, growth and income, aggressive growth, and international.
Dave
How do I surprise my spouse with gifts?
Dear Dave,
How do you buy a surprise gift for your spouse when you both see the budget and handle the checkbook?
Anonymous
Dear Anonymous,
Start by having a gift-giving category as part of your budget. This works both ways, one for each of you. That way, you'll both know how much goes into that category, but you won't know where something was purchased or what was bought.
I think the gift category is the best and most fair way to give you both input and control over the budget. The idea that you're going to sneak up on your wife or husband with a $10,000 gift is pretty unrealistic if you're working on your finances together!
Dave
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