What's a 20yo to do?

I dion't think a 20 yo would know where they will live in 3 years... graduation and work could take an inifinite number of turns. In this case, saving for a house should not be primary savings consideration.

Setting aside even $1000/year into an IRA (if they have earned income) would pay much bigger dividends, IMO.

She has a once in a lifetime opportunity to put away the annual $4000 in a Roth IRA, and watch it grow for 50 years. If she discovers in a few years, that she really made a mistake, that she wants to use the money to buy a home, she can withdraw her deposits for no penalty or tax. At just 8% return, she'd be on a path to having nearly $60K by age 31, and over $600K by age 60 with no further deposits after the 10th year. The magic of compounding. JOE

Until she graduates, I'd recommend she put the money first in a Roth IRA; second, ask her if she thinks about buying a house and review how much it will take for her given geographical choice, then have her start saving in a money market fund (or similar) for the house; third, maybe invest outside the IRA for retirement. If she needs the Roth IRA contributions at some point to buy a house, she can always take them out. Though she needs to get clear that generally she cannot put that money back into the IRA once it is removed.

Maybe have her (instead of dear ol' dad) start lurking here.

"Daniel T." wrote

I was about to say the same thing. Roth IRA is perfect.

She can take the principal out for emergencies or major purchases, but there's a strong incentive not to because she can't put the money back.

I opened a Roth IRA for my teenage daughter a couple of years ago. At first she thought I was crazy, but she is a math whiz and is beginning to see what happens if she leaves it alone for 50 or 60 year. Exponential curves are great if you give them enough time.

Bob

It depends on how soon she will be on the job market. If it is a short time, she should reduce her part time work and complete her education early.

-- Ron