In your 20's? Time to start investing.
Think investing is just for middle-aged men in suits? Think again! Your 20's is the perfect time to begin investing and here's why.
In your early 20's you've graduated from college and started work, so you have the means to save. It's tempting to put off saving until you're further up the career ladder with a bigger salary. However, the longer you wait, the less you have of another critical asset - time.
Start saving as early as possible.
Of course, the more you put into your investments, the more you get out. So it requires you to take saving seriously. There's no magic formula here, growing your savings means cutting back on expenditure, increasing your income, or both.
It's not very glamorous, but your future self will thank you. Don't be one of the estimated 41% of millennials with $0 in savings. The general rule of thumb is that your basic savings should be 3-6 months of income.
To get the most out of your savings long-term, you'll want more than one savings fund:
- One for money that can be accessed quickly for emergencies and life events like starting a family.
- One for long-term investment growth.
Your 'emergency' funds are better in a standard savings account for easy access (shop around for the best interest rate). However, your long term savings are best invested in a product that provides you with the opportunity for bigger growth.
Why investing is the best long-term choice
Investing allows you to grow your money. While you will see some growth in a savings account, that growth is usually small.
You could put all your money in a bank account, or into a bank-provided product. But if you're looking for real growth, they're often not the best choice.
How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. - Robert G. Allen
We've all heard the old adage time is money - and when it comes to investing, it's very accurate. The more time you have, the more growth you are likely to see, which is why your 20's is the ideal time to start.
Proper investing requires time and patience. You need to be able to sit through market fluctuations, and your initial growth may be smaller than with your savings account. However, over time, your growth should be exponential. Investing is is a long term strategy.
Of course, there are occasions where 'waiting it out' is absolutely not the best plan, and that's why getting the right advice and information is invaluable.
Digital technology makes investing accessible.
Investing can seem intimidating at first, like an exclusive club with its own secret language. Luckily, the core concepts that you need to know are quite simple when you break them down. And there are now dozens of online advisors and apps using sophisticated AI that can help you invest your money wisely.
Don't have the cash to invest a lot up-front, but want to learn about investing? Micro-investing apps like Stash allow you to invest as little as $5 for a small monthly fee. Stash also provide you with access to their educational articles so that you can learn more about managing your finances.
Services like Betterment can help you invest wisely without spending hours studying the markets. The basic plan doesn't have a minimum investment and gives you access to their robo-advisors for a 0.25% management fee. With $100,000 or more invested, you can opt to have unlimited phone access to certified financial planners for a 0.40% fee. If you're not sure where to begin, they also offer advice packages for a one-off fee.
Robinhood is a platform for more confident investors. With no commission or monthly fees, you can invest as little as $5 per month. There are no robo-advisors like you get with Betterment, and it's more complicated for a beginner to use than Stash. However, it does give you a wide variety of investment options. You can choose to invest in individual stocks, options, ETFs, and cryptocurrency.
Don't delay taking control of your financial future
Digital technology has made saving and investing easier and more accessible than ever before. Not only can you invest at the touch of a button, but you can also access up to date information and reports right from your chosen app.
Although investment apps have made it easier to invest small amounts of money, don't neglect your emergency savings. Work on saving as much as you can to set yourself up for a more secure immediate future.
Once you have your emergency savings topped up to at least 3-6 months of income, it's time to focus on your longer-term financial goals via investing.
Whatever your age, the best time to start saving and investing is right now.
