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Discussion in 'General Investing Discussion' started by Old Mate, 16th Apr, 2008.

  1. Old Mate

    Old Mate New Member

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    Hey everyone new guy looking for advice here.:)

    First a little information about me.
    I'm 17 years old (18 tomorrow) and finished school last year. I currently work about 30 hours a week at a supermarket and am in the process of getting a second part time job at which i will most likely work 20 or so hours a week.

    I am living at home and saving about 95% of my income. I have about $10,000 worth of CBA and WES shares and close to $5,000 in the bank.

    I'm basically wondering what should i do with the 5k in the bank and future income. I am tossing up whether to buy another bunch of shares as soon as possible or to keep saving and try to get a deposit for an investment property. I'm thinking i should buy more shares for the moment as the bank may having problems giving a home loan to a teenager.

    So what do you guys think i should do? And does anybody know the youngest age that a bank will give a home loan to? All advice, comments and criticism will be greatly appreciated.

    Thanks for your time
     
    Last edited by a moderator: 16th Apr, 2008
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    In theory a bank will lend to an 18 year old - but you need to show a regular income and enough servicability to be able to afford the loan.

    As a general rule of thumb - if the loan would cost you more than 30% of your income, the bank is not likely to lend to you (but this isn't a hard rule - you'd need to talk to the banks or a mortgage broker to find out exactly what the banks will lend for your circumstances).

    Don't let anyone tell you it can't be done - there are always ways to achieve what you want.

    The first step would be to start thinking about what it is you want to achieve - do you have any life goals ? Do you have a plan for the money ? Why are you saving/investing ? These are difficult questions for most people (especially young people) - but they are very important and will help you decide on the best approach forward.

    One thing I will suggest is that if you are likely to need that money for any purpose within the next 1 - 2 years, I would be reluctant to invest it - I think there will be more volatility in both the sharemarket and real estate market in the short to medium term. If you are happy to invest for the long term and can live with short term volatility, then go for it.

    PS. welcome to the forums!
     
  3. Old Mate

    Old Mate New Member

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    Thanks for the reply Sim

    I won't really need the money for the short term so i am in it for the long term benefits. That's why i want to work as much as possible while I'm still at home and can put it all into assets that will make me money. It looks like it will be a couple of years before i can get a home loan so i will go shares for the time being i think
     
  4. DaveA

    DaveA Well-Known Member

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    I recieved my first loan at 21. The bank i was with didnt even ring the employer to see if i worked there, nor did they ask to see a savings record....(this was only october last year and was after the inital credit cruch worries)

    So yes it can be done...But make sure you can afford it (ie the negative gearing parts)

    if you invest your money (rather than leave it in the bank) id say your in a much better position (in my opinion) as at 19/20 you'll want to blow it on a car/going out.....

    ive said it before, but for young people (like me and you) capital preserving is probably more important than making money.... If you can preserve your 15k savings over the next 5 years, you will be so far ahead of your peers (most will have no savings, high credit cards and a car loan for a deprecating asset)..

    all in all said dont forget to enjoy life (so atleast spend some of your cash)
     
  5. Old Mate

    Old Mate New Member

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    Thanks for your reply Dave,

    Was your first loan for a house or for something much smaller?
     
  6. DaveA

    DaveA Well-Known Member

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    a unit in sydney.. but yeh as you can imagine, that doesnt mean its a small mortgage by any strech of anyones imagination.
     
  7. EMP

    EMP Active Member

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    I got a home loan at 18, so it definitely happens. Not that I would advise doing it, especially right now, but the bank won't care as long as they can tick the right boxes on their application form. Having said this, in my case the loan amount and the LVR were very low, so the bank really wasn't risking that much. You might have some trouble if you want a more "normal" home loan with a LVR of 90%.
     
  8. Jacque

    Jacque Team InvestEd

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    Hi OM and welcome to InvestEd :)

    Firstly can I say Well Done! on having such ambition and goal setting well in place at such a young age- it's not every 17-18yr old that is as wise :D

    Can I just ask, however, if you intend to buy a car in the near future? (if you don't already have one, that is) This is usually the "first" big buy of most teenagers, and I always advocate not going into debt for a vehicle, if you can possibly avoid it.

    However, if you're in no need of wheels, then I'd second Sim's suggestion and at least have a buffer in the bank of a few thousand, just in case. Perhaps also consider putting money into a short term deposit as some of the interest rates at the moment are particularly good - check out ING and others in this link. I believe that up to 8.5% is possible, if you shop around. Best of luck with it all!

    Best Term Deposits : Online Bank Account Special Offers
     
  9. naz

    naz Member

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    Wow do you really think that? I thought it was people close to retirement who thought capital preservation is most important. The worst that can happen when you're young is that you loose a lot (or all) of your investments but you have a lot of time to earn the money again and lots of time for the investment to come good (not that I'm suggesting being TOO risky and/or not cutting your losses.

    And I agree with enjoying life (and hence spending some money)
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I agree naz - and while I don't advocate overly risky strategies, I also believe that when you are younger, a more aggressive (but still sensible) investment strategy is worthwhile - there is much less to lose, and plenty of time to recover from mistakes or unforseen events.

    All too soon there will be housing and family to deal with that eat up all spare capital - so better to achieve what you can before that time in my opinion. While also enjoying life too :D
     
  11. bundy1964

    bundy1964 Well-Known Member

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    I think he was refering to having savings then blowing them on hedonistic pursuits. I did tread water for about 10 years before finding motivation to invest again.

    If you don't enjoy life it won't matter how much you make, I know my vices and what they cost so as long as asset growth/income is greater than spending I am headed in the right direction. Given that I think I have a limited time before I suffer from investment burnout, my vices prolong the amount of time I will be able to keep the commitment up before going into preserve mode.

    If I started off fresh a nice simple buy of either an index fund/ETF or a geared fund and reinvest while you learn.
     
  12. DaveA

    DaveA Well-Known Member

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    yes sorry this wasnt aimed at an investment strategy. It was aimed at the spending process... (i highly beleive you should have a high growth investments at a young age)...

    but if you put your money into a bank its easy to touch.

    If you put it in a unlisted managed fund (which it is hard to get out) because its harder to, you may find over a 5 year time frame (even if the fund returns less than a bank account) you will have more of your balance...

    sorry if i confused anyone..