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Dr. Don Taylor, CFA, advice columnistAn ambitious start to reaching life goals

Dear Dr. Don,
I'm a 15-year-old girl, 16 in a few days, and I've recently taken an interest in finance, saving and investing. I've always had big dreams for the future and it just occurred to me that I must take high investing measures to get them done. The tough part is where to begin.

I've gotten a work permit and started working a part-time job, at a cafe paying a small $160 a month for the three -- occasionally four --- days a week I work. But it still just doesn't seem like enough to get me started off.

The goals in which I have accumulated sometimes seem "too big" for my own good. These goals include saving up and eventually starting a money market fund for a house by the time I'm 18 (so I can buy that house by the time I'm 25), a four- or five-year CD account for graduate school, stocks and bond investment by the time I'm 20 and a retirement plan going steady by the time I'm 21. There is no need to deal with a car since I'm turning 16 and it's a present.

In the long run, these goals just seem too close together and maybe a bit overwhelming. With interest/APY rates today, it's even more difficult to find a bank suitable for my needs.

In short, the question is; how does one so young yet so close to adulthood go about her goals in an organized manner? How does one complete them?
-- Ashley Accumulates

Dear Ashley,
It's great that you're looking toward the future and trying to figure out how saving and investing can help you reach your future goals. Don't get too far ahead of yourself, however, by creating unrealistic expectations on what you can achieve with your investments over the next 10 years. As I like to say, "You can't do better than your best."

Let's say you're able to put aside $100 per month over the next two years until you turn 18. Ignoring the investment returns for the moment, you've accumulated $2,400. That's a tidy sum but not enough to fund multiple goals of a house/graduate school/retirement fund.

How you decide to invest the money will influence its investment returns, but even assuming a 10-percent return over this initial time period, and ignoring any tax impact, your portfolio is worth just $2,645. Invest at a more conservative 5 percent and you'll have a portfolio worth $2,530.

The point is that when you're starting out in a savings program there's not a lot of upside in swinging for the fences in how you have the money invested. What makes the biggest difference in the size of your portfolio is your contributions to the account.

That doesn't mean you shouldn't work toward these goals or save your money. It just means that you have to prioritize what it is you're trying to accomplish over the next 10 years. Getting a graduate degree, for example, could provide you with job opportunities that you wouldn't have without that degree. That higher income stream helps you more readily accomplish your other life goals.

For the next two years, put aside what you can in savings and investments and see how these goals become more or less important to you over that time period. While there's never a wrong time to think about your future, and having goals gives you an incentive to stick to an investment program, there's just a little too much specificity for this point in your life.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money."'s corrections policy -- Posted: June 1, 2006
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