Working a Summer Job? Kevin O'Leary Has Great Advice on What to Do With Your Paycheck
- You may need some of your summer earnings to cover near-term expenses.
- If you have money you don't need right away, investing it is a solid bet.
It pays to take his advice to heart.
If you're a student, you have options for the summer -- bum around, take classes, or pick up a summer job. Many people opt for the latter because it gives them spending money, helps them build savings, and makes things like travel at a young age more feasible. But if you've been holding down a job this summer, it pays to take the following advice from Shark Tank's Kevin O'Leary.
Put your money to work
You may want or need most of your summertime earnings for specific things, from college tuition to paying off the credit card balance you racked up this past semester. But O'Leary insists that it's never too soon to start thinking about your future. And a good way to secure it is to invest some of your money from a young age.
O'Leary insists this is a practice he's always made a point to uphold. Back when he was earning a mere $10 or $12 an hour, he said he'd routinely sock away 10% to 15% of his earnings and invest it for the future. And it pays for you to do the same.
Many people don't start saving for milestones like retirement until well into their 20s or even later. But if you start investing in your late teens, you'll give your money that much extra time to grow.
Case in point: Imagine you earn $4,000 this summer, and you take $1,000 of that and invest it in a brokerage account. If you stick to S&P 500 index funds (funds that aim to match the performance of a popular market index), you might generate an average annual 8% return in your brokerage account, since that's even a little bit below the stock market's average. And that means in 50 years, your $1,000 will be worth about $47,000.
Advice worth taking
It may be that you're holding down a job this summer to pay for college and avoid having to rack up debt in the course of your studies. And if so, you may be inclined to put every dollar you earn toward that goal. But if you have any money left over, it pays to look at investing it like O'Leary did back when he was younger.
Of course, before you invest your money, you should make sure of one thing -- that you have some money in your savings account to pay for emergency expenses. But if you're good on emergency savings, then it definitely pays to put your money to work by opening a brokerage account. You can even open an IRA and invest your money specifically for retirement if that's a route you want to take.
Granted, with an IRA, your money is more restricted than it is with a regular brokerage account, because you can't take withdrawals without penalties until age 59½. But IRAs also give you tax breaks on the money you put in, so it's worth looking at one if you have some money to spare after plugging away at your job all summer long.
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