[USER]

This question stems from a place of – what next?

I’m currently 4 years out of college, one of which I spent making $1000 monthly in americorps. 3 in corporate. My salary is at $100k and it’s only looking up.

• No debt
• Renter (in LA)
• Open to moving to Chicago but not open to moving to a suburb
• $16k in HYSA emergency fund
• $2k in brokerage account
• $8k in HYSA for a down payment fund
• $11k in 401k, just increased my contribution to 6% traditional 2% roth 401k
• $8k in Roth IRA
• Zero–based budgeting and sinking funds

I save a significant portion of my income but can’t help but feel like I could or should be saving more. I’ve heard so many horror stories of one financial mistake ruining everything and don’t want to become another statistic.

I don’t want kids and aspire to be the rich, cool, generous aunt. Should I set up 529 accounts for the kids in my life? Is that something people usually talk to the kids parents about first, or let it be a surprise? Any tips?

[Aaron]

I’m not challenging what you have heard but I’ll say that the idea that one financial mistake destroys someone’s life is not one that I typically encounter.

I find that to generally be hyperbole because someone has some paper losses in a stock or missed some kind of opportunity if you are4 years out of college and don’t spend outside your means it’s very unlikely anything financial “mistakes“ you are making are going to destroy you financially.

[Richard]

One thing I did for my niece when she was born was open a custodial account for her through my brokerage. Instead of giving her gifts and money for birthdays and holidays, I put $50-$100 into a total market ETF. She’s 16 now and there is $12k in it. I had to turn my focus a little more towards my daughter along the way.

Aside from that advice, you’re doing great. Before getting too generous, take care of yourself. Max the Roth. Up the 401k, find a house….then maybe you can give a little more. But for now, give a little for holidays/bdays instead of toys.

Don’t miss: Are 529 plans considered an asset when determining net worth if you are the owner?

[Colin]

Like the oxygen mask on the airplane—set up your finances before setting up the kids’. If I were you I would go hard on my own investments and try to build up that Roth IRA and brokerage account significantly over the next 5-10 years. Reduce expense and increase income as much as possible. That way 10 years from now you’ll have a huge amount invested and working for you.

Once you’re set up then it prob wouldn’t hurt to trickle some money into a 529, but I would t make that your mission. You’re looking at ~$300k for college nowadays and that price will only rise. Think of it as, how many more years would I have to continue working to fund a year of my nieces’ and nephews’ college?

Consider moving some of your emergency fund to a Roth IRA. You can always withdraw contributions without penalty. That’s a lot of cash to be on the sidelines. Plus, if you’re a high earner with the ability to save a significant portion of each paycheck, then you should be able to handle an unexpected cost as soon as the next paycheck comes (barring the emergency being a job loss). Check out Mr. Money Mustache’s view on emergency funds. Just one perspective but has worked well for me—I’ve always had a little cash in reserve but don’t keep a huge emergency fund out of the market.

Congrats on staying in cities! Cities are so much more fun than the suburbs in my opinion. Was just in Chicago for Pitchfork Music Festival and it was amazing. Enjoy

[Chet]

I’m only coming here to discuss the “keeping a generous savings gift a secret and surprise later” question. I had the same dilemma, but for my grandkids. I did speak to my daughter about it, but thought that it would be a very nice graduation gift to hand my grandkids a “paid for college education” as a surprise.

However, after thinking it over for a good bit, I decided that if they know all along that college is a possibility for them, then perhaps they would be more studious in their studies.

Eventually, I told each of my grandchildren and it has paid off. They are already thinking longer term about their future and their potential. (BTW, I told them at ages 11, 6 & 5.)

Explore these too: Married couple with 2 529s one for each child – But..

[Corinne]

I don’t think you’re ready to start investing for others yet. Buy a home and hit ur first $100k invested and then re-evaluate. Ur doing great! Keep it up!

[Steven]

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[Author]

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