16 year old getting started on FIRE journey – HOW?

This post lists the practical steps to take for a 16/17 year old aiming for FIRE in the UK.

Our 2nd child of 6 kids, FU#2, has just left school and has started working on an apprenticeship. She is 16 years old and will soon be turning 17.

Over the last couple of years she has watched and listened in the background as we have travelled our own FIRE journey.

So, now she is earning a wage, we had a talk about setting her up on her own FIRE path, and she said that she wanted to do it.

Although apprentice wages are quite low (£3.90/hr, £156/wk), she has agreed that she will pay herself first and save 50% (£78/wk, £338/month) from the start.

This way she will not miss what she never had, and will learn from the beginning to live on less money.

The Practicals

What have we done, and what we plan to do.

1. Opened bank account – Santander 123 mini current account for 13 to 18 year olds, 3% interest on balances from £300-£2000 – DONE

2. Opened Help to Buy ISA – Santander Help to Buy ISA, 2.25% interest if have Santander 123 account as above. (note: Help to Buy ISA only available to open until 30th Nov 2019 so hurry if you need to open one). You can save upto £1200 in the first month then £200/month after that. – DONE

3. Deposited £1200 savings from Saturday job and unspent Birthday/Christmas money into Help to Buy ISA (HTB ISA). – DONE

4. Set up standing order for £200 per month into HTB ISA. – DONE

5. Save remainder of monthly savings £138 in current account to build up emergency savings fund.

6. In 12 months time when she turns 18 she will have £3400 in HTB ISA, and £1656 in the emergency fund.

7. When 18 open a Lifetime ISA (LISA) – Transfer HTB ISA to the LISA and change the standing order to contribute £333/month (£4000/yr- the max allowed). Invest the money in the LISA (stocks & shares LISA) in a low cost index fund (Vanguard US Equity Index Fund). FU#1’s LISA provider is Hargreaves Lansdown.

8. As wages increase continue to pay yourself first by saving 50% of net pay. Carry on putting the maximum contribution into the LISA. Open a Stocks and Share ISA (S&S ISA) and put the remaining savings (up to £16k) into that each month, again in low cost index fund.

9. If buying a house at some stage, assess when funds will be required and reallocate savings to LISA/S&S ISA as appropriate.

10. Consider joining workplace pension scheme for the free employer contributions. If on a low wage ensure it is a ‘Tax relief at source’ Scheme, not a ‘Net Pay Arrangement’ Scheme, to get tax relief on the contributions.

11. After 10 years (age 27), based upon your wage going up by £2k/year, and assuming 7% investment return, you will have a pot of £145k.

12. After 20 years (age 37) you will have £500k. Using the 4% rule, this will give you an income of £20k per year.

The above plan will no doubt need adjustments and tweaks along the way, but it will provide a solid foundation for FU#2’s future whatever she decides.

I hope she will be able to stick to it, whilst also enjoying herself and life at the same time. I have no doubt she will as she likes a good party, especially when we are away weekends at the caravan!

Any comments or questions welcomed.