Overview of DIY Money Jr - Choosing Your Investments
In this episode of DIY Money, the hosts answer a question from a 17-year-old listener who has already saved enough to cover college and wants help deciding what to do with the money left over. The discussion centers on how to choose between a Roth IRA, brokerage account, and savings account based on time horizon, flexibility, and financial goals rather than age alone.
The Listener’s Question
Abe, a repeat listener, explains that:
- He has worked hard and saved enough to pay for college
- He expects to have additional money left over
- He also plans to earn more money during college
- He wants to know whether that money should go into:
- a Roth IRA
- a brokerage account
- a regular savings account
- or some combination of the above
He also adds a humorous side note about creating a redneck trivia game show called “Mullet Over.”
Main Advice: Match the Account to the Goal
1. Don’t choose based on age alone
The hosts push back on the idea that a 17-year-old should automatically invest everything aggressively just because of youth. Instead, they emphasize that the real question is:
- When will you need the money?
- What is the money for?
If the money may be needed in the next 5–10 years, it should not be invested as if it is long-term retirement money.
2. Use a brokerage account for medium-term goals
If the money is likely to be used within about a decade—for example:
- a house down payment
- a car
- other major future expenses
—then a general brokerage account with a moderate risk level may make more sense than a retirement account.
3. Use a Roth IRA for money you likely won’t need
If Abe is confident that some of the money will not be needed for many years, the hosts strongly favor putting that portion into a Roth IRA.
Why?
- Money can grow tax-free
- Contributions can generally be withdrawn later if needed
- It gives him a way to invest early and let compound growth do the heavy lifting
They note a few Roth nuances, including:
- You can withdraw your contributions tax- and penalty-free
- There are some exceptions, including rules for first-time homebuyers
Important Planning Considerations
Build an emergency fund first
Allie emphasizes that Abe should not overlook a basic 3–6 month emergency fund, even if college expenses are already covered.
This matters because:
- College life can be unpredictable
- He may work less while studying
- Having liquid cash gives flexibility and protection
Flexibility matters when you’re young
The hosts encourage Abe to stay flexible instead of locking every dollar into one plan.
A good approach may be to split the money across:
- savings for short-term safety
- brokerage investments for medium-term goals
- Roth IRA contributions for long-term retirement wealth
Key Takeaways
- Time horizon should drive account choice
- Don’t invest money you may need soon as if it’s retirement-only money
- A Roth IRA is ideal for money you won’t need for a long time
- A brokerage account is useful for goals within the next decade
- Keep an emergency fund in cash
- Start early and let compound interest work
Notable Moments
- The hosts repeatedly praise Abe’s humor and confidence.
- The “Abe Froman, sausage king of Chicago” joke from Ferris Bueller’s Day Off becomes a fun running gag.
- The phrase “Mullet Over” gets highlighted as a clever game-show title idea.
Final Recommendation
For a young saver like Abe, the best move is not one single account, but a goal-based split:
- Savings account for emergency cash
- Roth IRA for long-term money he probably won’t touch
- Brokerage account for money that may be used in the next 5–10 years
The episode’s bottom line is classic DIY Money advice:
Live on less than you make, invest the rest, and do it for a very long time.