Yesterday was my 18th birthday. Woohoo! Finally legal. Like most other people, I had been eagerly anticipating becoming an “adult” under the eyes of the law. While I didn’t feel any different, I could now do a lot more for myself than I could just 24 hours before. Here are the first four things I did on my 18th birthday:
1. Open a Bank Account
If you haven’t done so already, now’s the perfect time to open a bank account. Having a bank account makes keeping track of your finances more convenient and keeps your money safe (and it’s necessary for the other steps).
Most major banks are FDIC insured. What does that mean? It means that your money is perfectly safe, even if the bank were to get robbed or experience some other financially damaging event. There is a limit to this insurance though, $250,000 per bank. If you’re starting off with upwards of $250,000, make sure you keep the FDIC insured maximum in one bank and then deposit the rest in another insured bank.
Having a bank account doesn’t just keep your money safe, but is also essential for most actions involving your money. While the rise of blockchain has caused some people to favor holding their money in cryptocurrency wallets, a bank account is still needed for depositing paychecks, applying for loans, getting a debit card, and investing, to name a few. Mobile banking has made all of these things much easier, as they can all be done in the palm of your hand.
To add the icing on the cake, many of the banking giants offer new account bonuses in the form of cash rewards. They usually require you set up direct deposit or have a minimum amount in your account, but some banks, like Chase, don’t require either.
2. Apply for a Secured Credit Card
Lines of credit don’t just appear out of thin air. Like most things in the adult world, they require time and effort. Unless you’re one of the lucky few who had their name put on a parent’s card as an authorized user before 18, you need to build your credit. That’s why the first thing I did was put in an application for a secured credit card.
For those who don’t know, a secured credit card is essentially a credit card with training wheels. You deposit a minimum amount (which varies per card) which the company can use as collateral. That collateral amount sets the limit for the card. The credit card companies know that in the event you fail to meet payments, they always have your initial deposit, ensuring they don’t lose money.
The main difference between secured and unsecured cards, aside from the initial deposit, is the interest rates. Due to your nonexistent or poor credit history, companies are going to charge higher interest rates on a secured card, with an average of about 17.75%. For reference, the average interest rate for ongoing cardholders with decent credit sits near the 15% mark.
There are plenty of cards to choose from. Normally you’re going to want to look at the interest, any benefits for opening an account, as well as any annual fees. Personally I despised the idea of paying to spend money, so any card with annual fees was an immediate “no” from me. With that criteria sorted, I was mainly just looking for a card with a good rewards program. I wasn’t concerned with the interest rates as much considering I never planned to allow my account to accrue any.
The card would be used for something like gas or groceries and then immediately paid off. I was going to treat it like my debit card basically, swiping it for the necessities and nothing else. That way I could never lose control of my debt. If I only spent the money I had, I would never run into a problem with paying back money I owed.
By the time I had finished my research, there was only one clear option: the Discover it® Secured Credit Card. Remember how I said I was looking for the best rewards on a card? I think I found them. With this card, Discover gives you 2% cash back at gas stations and restaurants (with a limit of $1,000 each quarter. While already rare for a secured card, it actually gets better. They match every dollar you’ve earned from your first year with NO limit. Of course, 22.99% variable APR isn’t the best in terms of rates, so I see why they wanted to offset it with some benefits.
That being said, I highly recommend that anyone who has poor or no credit opens a Secured Credit Card. Building a good credit score is necessary if you want good interest rates on loans, access to the best credit cards, insurance discounts, and so much more. Considering the time it takes and the benefits you can reap, it is best to get started as soon as possible.
Disclaimer: I am not associated with Discover in any way. My opinions are my own. Please consult a professional and/or do your own research before choosing to open a new line of credit.
3. Increase Sources of Income
I know what you’re thinking. “But Antonio, I didn’t need to wait until 18 to apply for a job.” Good for you hypothetical person I made up to prove a point, good for you. Even if you’re already employed by the time you turn 18, it never hurts to look at new opportunities.
Being a legal adult means certain career options have opened up to you. Want to serve your country? Join the military. Want to serve your community? Become a police officer. Want to be awesome and save lives? Become a fireman (or woman) or an EMT.
Aside from government jobs, opportunities for higher paying positions in your field may have opened up as well. If you work as a busser, you may be able to work as a server now (depending on your state’s labor laws). Who knows? You may even be able to become a sales associate for a certain family-owned company (shoutout to FarmFreshtoYou).
Aside from the traditional 9-5’s, you can also become a freelancer now. Uber, Postmates, Grubhub, Fiverr, etc. all provide opportunities for supplemental income. The cool thing with these is that their profitability is limited only by how much work you put in. If you really like doing Ubereats or a similar delivery service, you could put in 8 hours a day just like a normal job.
In another league of its own, you can also do ecommerce. You can take advantage of the whole “being 18” thing to either build a brand or begin selling on websites like eBay, OfferUp, Amazon, etc. This is definitely more oriented towards being a side hustle, but with enough commitment, it could definitely become a full time job. Even if you don’t plan to sell things as a source of income, having access to services like ebay or offerup can help you snag deals on items you already wanted, so it’s a win-win.
4. Open a Brokerage Account
“An investment in knowledge pays the best interest.” — Benjamin Franklin
It’s no secret that one of the quintessential tools for wealth-building is having a brokerage account. With one, you can trade ETFs, Index Funds, Stocks, and Options. While there are many trading platforms to choose from, I went with Robinhood.
The signup process was next to effortless. All I had to do was put in my email and choose a password. I had to submit a picture of my ID to verify my address and my SSN to verify my identity. It also asked about my investing experience/goals. If you inform Robinhood that you are an intermediate or advanced investor with 1+ years of experience, it offers options trading in addition to the platform’s default services.
Don’t lie about this though, as options aren’t for everyone. The community of r/WallStreetBets has shown plenty of nasty losses that would discourage any inexperienced investor from making the same mistakes they did. As with anything related to personal finance, do your own research or speak to a professional before making any decisions.
The convenience of being able to trade on your phone in combination with the beginner-friendly interface makes Robinhood ideal for new investors to learn on. It has a Discover feature which includes simplified information about various options trading strategies for beginners, and even a probability estimate to show you how likely the investment is to profit. Regardless of the prediction, please be certain to make a decision off of more than just the computer-generated margin. It can’t guarantee anything.
For those of you not interested in options, Robinhood also offers a free stock to new accounts, and offers another each time someone opens a new account from your invitation. They basically pay you to start investing, so why not?
Other platforms also offer different bonuses for signing up, but I’ll go into greater detail on those brokerages here.
18 year-olds may not be ‘adults’ just yet, but they are in the eyes of the law (well, sort of). At the very least, everyone should know what options are available to them once they cross the threshold into the real world. I understand a lot of people at this age aren’t focused too much on retirement or their financial future, and would rather do things that are of greater interest to them. Eventually though, they’ll hit a point in life where money starts mattering, and this post will be here.
Whether you’re on top of it at 18 or needed a few years to realize the importance of your financial future, you’re probably reading this because you wanted to know where to start. Well, if you’ve got this far, the only step left is to take action. Good luck!