Dave Says: College Student Wants to Start Investing

Dear Dave,
I’m in college and 21-years-old. I’ve got $1,000 in the bank for my emergency fund, plus I’ll be debt-free in about six months. Is it too early to begin saving for retirement?
-- Andrea

Dear Andrea,
You could start a retirement fund, but I’d start a “graduation fund” on top of your emergency fund. You’re going to experience lots of transition in the years after college with new jobs, new locations, and new relationships. All these things are going to require cash because you don’t want to start your new life by going back into debt.

Once you have this in place, I’d suggest investing in mutual funds and maybe a Roth IRA. If you do all this at your age, you’ll have a great start in life and you can look forward to being a very rich little old lady when you retire.
-- Dave