As a young adult, what can I be doing with my excess income?
I also have approx. £6000 in debt Just a note: you're guaranteed to get a return on whatever debt you pay off quickly.  Even if your debt is only 2%, you get a guaranteed return of 2% - which is higher than most of the savings here in the US (not sure about the UK). You mention saving for a house, which is also a good idea, but with debt, I'd recommend eliminating that if you're paying any interest at all.  This won't be popular to write, but markets are high right now, so even though you may feel that you're missing out, the return on paying off debt is guaranteed; markets aren't. If I were you I would just save the money until I had at least 5000 pounds to keep as an emergency fund. There are various kinds of unexpected events and it is smart to have some cash in case a problem comes up. Next time I would recommend buying a car you can afford. Borrowing money to buy nice things is the enemy of wealth accumulation. Also, when you buy a car for cash you will get a much better deal than when you let a dealer put his foot on your neck. This is all very basic and general advice, that works for most, but not all.  You are unique with your own special needs and desires.  Good luck! P.S.: not exactly related to your question, but when you get more familiar with investing and utilizing your money, find more ways to save more. For example, change phone plan, cut the cable, home made food in bulk, etc. You apparently assume that pouring money into a landlord's pocket is a bad thing. Not necessarily. Whether it makes sense to purchase your own home or to live in a rental property varies based on the market prices and rents of properties. In the long term, real estate prices closely follow inflation. However, in some areas it may be possible that real estate prices have increased by more than inflation in the past, say, 10 years. This may mean that some (stupid) people assume that real estate prices continue to appreciate at this rate in the future. The price of real estates when compared to rents may become unrealistically high so that the rental yield becomes low, and the only reasonable way of obtaining money from real estate investments is price appreciation continuing. No, it will not continue forever. Furthermore, an individual real estate is a very poorly diversified investment. And a very risky investment, too: a mold problem can destroy the entire value of your investment, if you invest in only one property. Real estates are commonly said to be less risky than stocks, but this applies only to large real estate portfolios when compared with large stock portfolios. It is easier to build a large stock portfolio with a small amount of money to invest when compared to building a large real estate portfolio. Thus, I would consider this: how much return are you going to get (by not needing to pay rent, but needing to pay some minor maintenance costs) when purchasing your own home? How much does the home cost? What is the annual return on the investment? Is it larger than smaller when compared to investing the same amount of money in the stock market? As I said, an individual house is a more risky investment than a well-diversified stock portfolio. Thus, if a well-diversified stock portfolio yields 8% annually, I would demand 10% return from an individual house before considering to move my money from stocks to a house.
The amount of money you have should be enough for you to live a safe but somewhat restricted life if you never worked again - but it could set you up for just about any sort of financial goal (short of island buying) if you do just about any amount of work. The basic math for some financial rules of thumb to keep in mind: If your money is invested in very low-risk ways, such as a money market fund, you might earn, say, 3% in interest every year. That's $36k. But, if you withdraw that $36k every year, then every year you have the same principal amount invested. And a dollar tomorrow can't buy as much as a dollar today, because of inflation. If we assume for simplicity that inflation is 1% every year, then you need to contribute an additional $12k to your principal balance every year, just so that it has the same buying power next year. This leaves you with a net $24k of interest income that you can freely spend every year, for the rest of your life, without ever touching your principal balance. If your money is invested more broadly, including equity investments [stocks], you might earn, say, 7% every year. Some years you might lose money on your investments, and would need to draw down your principal balance to pay your bills. Some years you might do quite well - but would need to remain conservative and not withdraw your 'excess' earnings every year, because you will need that 'excess' to make up for the bad years. This would leave you with about $74k of income every year before inflation, and about $62k after inflation. But, you would be taking on more risk by doing this. If you work enough to pay your daily bills, and leave your investments alone to earn 7% on average annually, then in just 10 years your money would have doubled to ~ $2.4 Million dollars. This assumes that you never save another penny, and spend everything you make. It's a level of financial security that means you could retire at a drop of the hat. And if don't start working for 20 years [which you might need to do if you spend in excess of your means and your money dries up], then the same will not be true - starting work at 45 with no savings would put you at a much greater disadvantage for financial security. Every year that you work enough to pay your bills before 'retirement' could increase your nest egg by 7% [though again, there is risk here], but only if you do it now, while you have a nest egg to invest. Now in terms of what you should do with that money, you need to ask yourself: what are your financial goals? You should think about this long and hard (and renew that discussion with yourself periodically, as your goals will change over time). You say university isn't an option - but what other ways might you want to 'invest in yourself'? Would you want to go on 'sabbatical'-type learning trips? Take a trade or learn a skill? Start a business? Do you want to live in the same place for 30 years [and thus maybe you should lock-down your housing costs by buying a house] or do you want to travel around the world, never staying in the same place twice [in which case you will need to figure out how to live cheaply and flexibly, without signing unnecessary leases]. If you want to live in the middle of nowhere eating ramen noodles and watching tv, you could do that without lifting a finger ever again. But every other financial goal you might have should be factored into your budget and work plan. And because you do have such a large degree of financial security, you have a lot of options that could be very appealing - every low paying but desirable/hard-to-get job is open to you. You can pursue your interests, even if they barely pay minimum wage, and doing so may help you ease into your new life easier than simply retiring at such a young age [when most of your peers will be heavy into their careers]. So, that is my strongest piece of advice - work now, while you're young and have motivation, so that you can dial back later. This will be much easier than the other way around. As for where you should invest your money in, look on this site for investing questions, and ultimately with that amount of money - I suggest you hire a paid advisor, who works based on an hourly consultation fee, rather than a % management fee. They can give you much more directed advice than the internet (though you should learn it yourself as well, because that will give you the best piece of mind that you aren't being taken advantage of). Does your employer provide a matching contribution to your 401k?  If so, contribute enough to the 401k that you can fully take advantage of the 401k match (e.g. if you employer matches 3% of your income, contribute 3% of your income).  It's free money, take advantage of it. Next up, max out your Roth IRA.  The limit is $5000 currently a year. After maxing your Roth, revisit your 401k.  You can contribute up to 16,500 per year. You savings account is a good place to keep a rainy day fund (do you have one?), but it lacks the tax advantages of a Roth IRA or 401k, so it is not really suitable for retirement savings (unless you have maxed out both your 401k and Roth IRA). Once you have take care of getting money into your 401k and Roth IRA accounts, the next step is investing it.  The specific investment options available to you will vary depending on who provides your retirement account(s), so these are general guidelines. Generally, you want to invest in higher-risk, higher-return investments when you are young.  This includes things like stocks and developing countries. As you get older (>30), you should look at moving some of your investments into things that less volatile.  Bond funds are the usual choice.  They tend to be safer than stocks (assuming you don't invest in Junk bonds), but your investment grows at a slower rate. Now this doesn't mean you immediately dump all of your stock and buy bonds.  Rather, it is a gradual transition over time.  As you get older and older, you gradually shift your investments to bond funds. A general rule of thumb I have seen: 100 - (YOUR AGE) = Percentage of your portfolio that should be in stocks Someone that is 30 would have 70% of their portfolio in stock, someone that is 40 would have 60% in stock, etc. As you get closer to retirement (50s-60s), you will want to start looking at investments that are more conservatie than bonds.  Start to look at fixed-income and money market funds. The best thing to do right now is track your spending. You know you're saving 1k a month, and you know you're spending 1k a month on rent. That's 24k so far. I presume you'll have some income tax taken out, let's assume it's another 6k to round us neatly up to 30k. Since you earn 80k and you've spent 30k so far, you have another 50k unaccounted for. If you're in the USA I'd recommend using mint.com or a similar service to automatically track your transactions, or even just a spreadsheet if you don't like handing out your bank details (and you shouldn't). After that, I agree with SoulsOpenSource's answer. Write a budget and try to figure out where the fat can be trimmed. When I started tracking I saw I was spending almost a hundred bucks every week on fast food, due to poor planning and laziness. I decided to cook more and plan better and now I'm spending less than half that - in the last year I've saved almost three thousand dollars! If you want to save up for your future (and good on you if you do!) then there'll be some choices to make ahead. If you're spending a few hundred bucks on going out drinking every weekend, or you grab two coffees every day, or you buy fifty blurays a month (do people still buy blurays?), you'll have to ask yourself: Will I be happier spending money here than saving for my future? The first thing you need to do is to set yourself a budget. Total all your money coming in (from jobs, allowances, etc.) and all your money going out (including rent, utilities, loan repayments, food, other essential and the luxuries).  If your money coming in is more than your money going out, then you are onto a positive start. If on the other hand your money going out is more than the money coming in, then you are at the beginning of big trouble. You will have to do at least one of 2 things, either increase your income or reduce your expenses or both. You will have to go through all your expenses (money going out) and cut back on the luxuries, try to get cheaper alternatives for some of your essential, and get a second job or increase your hours at your current job. The aim is to always have more money coming in than the money you spend. The second thing to do is to pay off any outstanding debts by paying more than the minimum amounts and then have some savings goals. You said you wanted to save for a car - that is one saving goal. Another saving goal could be to set up a 6 month emergency fund (enough money in a separate account to be able to survive at least 6 months in case something happened, such as you lost your job or you suddenly got sick). Next you could look at getting a higher education so you can go out and get higher paying jobs. When you do get a higher paying job, the secret is not to spend all your extra money coming in on luxuries, you should treat yourself but do not go overboard. Increase the amounts you save and learn how to invest so you can get your savings to work harder for you. Building a sound financial future for yourself takes a lot of hard work and discipline, but once you do get started and change the way you do things you will find that it doesn't take long for things to start getting easier. The one thing you do have going for you is time; you are starting early and have time on your side. You're young.  Build a side business in your spare time.  Invest in yourself.  Fail a few times when you have some time to recover financially. Use the money that you would have let sit in some account and develop your skills, start up an LLC, and build up the capacity to get some real returns on your money. Be a rainmaker, not a Roth taker. "Between ""fresh out of college"" and ""I have no debts, and a support system in place which because of which I can take higher risks."" I would put every penny I could afford in the riskiest investment platform I was willing to.  Holding onto money in a bank account is likely to cost you %1-%2 a year depending on what interest rates are and what inflation looks like. Money invested in a market could loose it all for you or you could become an overnight millionaire. Loosing it all would suck but you are young you will bounce back. Losing it slowly to inflation is just silly when you are young.  If there is something you know you have to do in the next few years start to save for it but otherwise use the fact that you are young and have a safety net to try to make money." Congrats on saving aggressively when you're young. I'm not a huge fan of tax-advantaged accounts because the rules can change on them, and there's already a penalty for you to take out that money for most purposes until you've almost tripled your age. Free money (a match) overcomes this reservation for me, but I'm not contributing anything beyond that.  I'm paying my taxes on the rest and am done with them. Watching your money grow tax-free for another 37 1/2 years only to see your (and everyone else's) marginal tax rate rise isn't much fun.  I'm not saying that will happen, but it certainly could. What is the goal of the money?  If it is to use in the short term, like savings for a car or college, then stick it in the bank and use it for that purpose. If you really want this money to mean something, then in my opinion you have only one choice:  Open a ROTH IRA with something like Vanguard or Fidelity and invest in an index fund.  Then do something that will be very difficult:  Don't touch it. By the time you are 65, it will grow to about 60,000.  However, assuming a 20% tax bracket, the value of that money is really more like 75,000.   Clearly this will not make or break you either way.  The way you live the rest of your life will have far more of an impact.  It will get you started on the right path. BTW this is advice I gave my son who is about your age, and does not earn a ton of money as a state trooper.  Half of his overtime pay goes into a ROTH.  If he lives the rest of his life like he does now, he will be a wealthy man despite making an average income.  No debt, and investing a decent portion of his pay. "Here's what I suggest... A few years ago, I got a chunk of change.  Not from an inheritance, but stock options in a company that was taken private.  We'd already been investing by that point.  But what I did: 1.  I took my time. 2.  I set aside a chunk of it (maybe a quarter) for taxes.  you shouldn't have this problem. 3.  I set aside a chunk for home renovations. 4.  I set aside a chunk for kids college fund 5.  I set aside a chunk for paying off the house 6.  I set aside a chunk to spend later 7.  I invested a chunk.  A small chunk directly in single stocks, a small chunk in muni bonds, but most just in Mutual Funds. I'm still spending that ""spend later"" chunk.  It's about 10 years later, and this summer it's home maintenance and a new car...  all, I figure it, coming out of some of that money I'd set aside for ""future spending.""" Are you sure the question even makes sense? In the present-day world economy, it's unlikely that someone young who just started working has the means to put away any significant amount of money as savings, and attempting to do so might actually preclude making the financial choices that actually lead to stability - things like purchasing [the right types and amounts of] insurance, buying outright rather than using credit to compensate for the fact that you committed to keep some portion of your income as savings, spending money in ways that enrich your experience and expand your professional opportunities, etc. There's also the ethical question of how viable/sustainable saving is. The mechanism by which saving ensures financial stability is by everyone hoarding enough resources to deal with some level of worst-case scenario that might happen in their future. This worked for past generations in the US because we had massive amounts (relative to the population) of (stolen) natural resources, infrastructure built on enslaved labor, etc. It doesn't scale with modern changes the world is undergoing and it inherently only works for some people when it's not working for others. From my perspective, much more valuable financial skills for the next generation are: "I recommend a Roth IRA. At your age you could turn 25K into a million and never pay taxes on these earnings. Of course there are yearly limits (5.5k) on the amount your can contribute to a Roth IRA account. If you haven't filed your taxes this year yet ... you can contribute 5.5K for last year and 5.5K for this year.  Open two accounts at a discount brokerage firm. Trades should be about $10 or less per. Account one ... Roth IRA. Account two a brokerage account  for the excess funds that can't be placed in the Roth IRA. Each year it will be easy transfer money into the Roth from this account. Be aware that you can't transfer stocks from brokerage acct to Roth IRA ... only cash. You can sell some stocks in brokerage and turn that into cash to transfer. This means settling up with the IRS on any gains/losses on that sale. Given your situation you'd likely have new cash to bring to table for the Roth IRA anyway. Invest in stocks and hold them for the long term. Do a google search for ""motley fool stock advisor"" and join. This is a premium service that picks two stocks to invest in each month. Invest small amounts (say $750) in each stock that they say you should buy. They will also tell you when to sell. They also give insights into why they selected the stock and why they are selling (aka learning experience).  They pick quality companies. So if the economy is down you will still own a quality company that will make it through the storm. Avoid the temptation to load up on one stock. Follow the small amount rule mentioned above per stock. Good luck, and get in the market." "For allocation, there's rules of thumb. 120-age is the percentage some folks recommend for stock market (high risk) allocation.  With the balance in bonds, and a bit of international fund to add some more diversity.  However, everyone needs to determine how much risk they're willing to take, and what their horizon is. Once you figure out your allocation, determine how much of your surplus goes into investing, and how much goes into short term savings for your short term financial goals such as purchasing a home. I would highly recommend reading about ""Financial Independence, Retire Early"" (FIRE).  Most of the articles I've seen on it were folks in the US, with the odd Canadian and Brit, but the principles should be able to work in the Netherlands with adjustment.   The idea behind FIRE is that you adjust your lifestyle to minimize expenses and save as much of your income as possible.  When the growth of your savings is > the amount you spend on a yearly basis, you've reached financial independence and can retire any time you wish. CD ladder is a good idea for your emergency fund, but CDs (at least in the US) usually pay around the same rate as inflation, give or take.  A ladder would help you preserve your emergency fund." I'd invest in yourself.  Start up a side business.  Take a certification class that gets your foot in the door for something else (auctioneering, real estate sales, whatever).  Bid on a storage auction and try to re-sell it.  Learn Spanish (or whatever second language is best for your area).  And so forth. Most of the suggestions thus far are either debt reduction or passive investment.  You have good control on your debt, and most passive investments pay jack (though Lending Club might be a bit better than most).  Build up another basket to put your eggs in and build equity and cash flow instead of interest and dividends.  You're young.  This is the time to learn how to do it. "I would like to add my accolades in saving $3000, it is an accomplishment that the majority of US households are unable to achieve. source While it is something, in some ways it is hardly anything.  Working part time at a entry level job will earn you almost three times this amount per year, and with the same job you can earn about as much in two weeks as this investment is likely to earn, in the market in one year.   All this leads to one thing:  At your age you should be looking to increase your income.  No matter if it is college or a high paying trade, whatever you can do to increase your life time earning potential would be the best investment for this money.   I would advocate a more patient approach.  Stick the money in the bank until you complete your education enough for an ""adult job"".  Use it, if needed, for training to get that adult job.  Get a car, a place of your own, and a sufficient enough wardrobe.  Save an emergency fund.  Then invest with impunity. Imagine two versions of yourself.  One with basic education, a average to below average salary, that uses this money to invest in the stock market.  Eventually that money will be needed and it will probably be pulled out of the market at an in opportune time.  It might worth less than the original 3K! Now imagine a second version of yourself that has an above average salary due to some good education or training.  Perhaps that 3K was used to help provide that education.  However, this second version will probably earn 25,000 to 75,000 per year then the first version.  Which one do you want to be?  Which one do you think will be wealthier?   Better educated people not only earn more, they are out of work less.  You may want to look at this chart." In addition to what others have said, I think it is important to consider that government retirement assistance (whatever it is called in each instance) is basically a promise that can be revoked. I talked to a retired friend of mine just yesterday and we got onto that subject; she mentioned that when she was young, the promise was for 90% of one's pay, paid by the government after retiring. It is very different today. Yes, you can gamble that you won't need the saved money, and thus decide not to save anything. What then if you do end up needing the money you did not set aside, but rather spent? You are just now graduating college, and assuming of course that you get a decently-paying job, are likely going to have loads more money than you are used to. If you make an agreement with yourself to set aside even just 10-15% of the difference in income right from the start, that is going to grow into a pretty sizable nest egg by the time you approach retirement age. Then, you will have the option of continuing to work (maybe part-time) or quitting in a way you would not have had otherwise. Now I'm going to pull numbers out of thin air, but suppose that you currently have $1000/month net, before expenses, and can get a job that pays $1800/month net starting out. 10-15% of the difference means you'll be saving around $100/month for retirement. In 35 years, assuming no return on investment (pessimistic, but works if returns match inflation) and no pay rises, that will still be over $40K. That's somewhere on the order of $150/month added to your retirement income for 25 years. Multiply with whatever inflation rate you think is likely if you prefer nominal values. It becomes even more noticable if you save a significant fraction of the additional pay; if you save 1/3 of the additional money (note that you still effectively get a 50% raise compared to what you have been living on before), that gives you a net income of $1500/month instead of $1800 ($500/month more rather than $800/month more) which grows into about $110K in 35 years assuming no return on investment. Nearly $400 per month for 25 years. $100 per week is hardly chump change in retirement, and it is still quite realistic for most people to save 30% of the money they did not have before.