Millennials, it's time to grow your money!

How Millennials Can Get Started Investing

Millennials, it's time to grow your money!
Millennials, it’s time to grow your money!

If you are one of the millions of young adults in this country and you’ve been considering investing, congratulations!  You’re already ahead of the majority of the other millennials out there.  But don’t pat yourself on the back just yet. You still need to do the work to get the ball rolling. But what’s the best way to get started? It may seem difficult, but it doesn’t have to be. Here are some tips that can help you get started investing right away.

Make a Budget

Don’t roll your eyes or sigh with boredom. If you’ve been researching and reading anything about personal finance, most likely you have seen this tip at least once. Why? The answer is that it’s a logical starting point. So, grab a notepad or set up a spreadsheet on your computer and get started so you can determine how much money you can set aside for investing. You can even use a free online tool like Mint to help you with your budget and tracking your spending.

Consider Different Investment Opportunities

There are many different ways to invest, and some involve more risk than others, so you should look each option over carefully before deciding how you want to get started investing. You could also take advantage of investment diversity by investing in at least a couple of different ways. That way if one doesn’t work out, you haven’t put all of your eggs in one basket.

Diversification based on different investment vehicles and underlying assets classes can make the difference between going bankrupt when a certain market crashes and staying afloat. Besides stocks, bonds, funds and real estate other available options are: foreign currencies , cryptocurrencies, soft and hard commodities and derivatives. For example currency option trading presents both an investment vehicle and a hedging instrument.

Some people think putting money into savings is the same as investing. While it’s a great idea to build up an emergency fund in a savings account for easy accessibility, you likely aren’t really earning anything off of this money. Savings accounts often have very low interest rates. Even high interest rate savings accounts are still very low compared to what you should try to earn from an investment.

Highly recommended reading: If You Can: How Millennials Can Get Rich Slowly

Investing in stocks might sound scary, but it’s actually easier than you might think. But that’s not the only thing you can invest in. You could invest in real estate, although you’ll likely need some liquid assets saved up in order to buy an investment property.

Another option would be to make sure you are investing in your 401K if you are eligible for one at your job. If not, you could always open an IRA instead to save and invest for your retirement that way.

Invest Free Money When You Can

Stop! There’s a way to get free money? In a way, the answer is yes. If you are working for a company offering to match your 401K investment, you should take full advantage of this if you can. The amount of money you can accumulate from your employer match is a great way to begin investing without all of the money coming out of your pocket, and the amount you invest is taken out of your pay pre-tax. This means you may not notice its absence quite as much when you get paid – you can’t spend what isn’t there!

When deciding which funds to put the money into, consider including funds that are lower risk, medium risk, and some that are higher risk. Choosing the largest percentage of money to go into the higher risk category is generally a good idea for millennials because with high risk comes high reward, and if you are planning to use this money for retirement, you have a long term timeline to save and invest.

Of course with high risk funds there’s also a greater chance of loss, but you can probably make that up over time. Generally speaking, this money will remain as an investment that grows over time, and most of these types of investments do show good growth rates even when there are downturns over a few months or years. This means you need to look at the long term growth rates of funds when making your decisions of where to put your money and don’t panic if the market drops.

Keep in mind, the list above is not the only way to get started investing for your future. However, now that you have a couple of ideas of how to get started investing, you should be able to put a plan into action and rest easy by letting your money go to work for you.

Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.

 

*Image Credit: Pictures of Money

13 comments

  1. So important to start as early as possible and take advantage of compound interest. Never leave free money on the table, take advantage of the 401K match, think of it as part of your overall compensation. Great tips!

  2. Great tips. I think it’s so important that we encourage people to start investing as early as possible. Compounding really works magic. I read an article that Boeing employees had turned down millions of dollars of FREE money because they did not contribute to the amount that they employer would match!

    • Laurie says:

      Yes, compounding interest really is like magic!! For many people it means the difference between retirement and not being able to retire. Thanks, Andrew!

  3. Kathy says:

    When our son got his first career job right out of college, he wisely asked for our advice regarding the benefits he should sign up for. The first one he (we) chose was the pension and 401k plan. His company has both and he was able to sign up for both. He was close to maxing out his contribution immediately and it took a hefty 17% out of his paycheck but since he’d never had a career type paycheck before, he didn’t miss it. After he’d been working for about 4 months, he told us he’d already opened a brokerage account so he could invest even further. Smart boy!

    • Laurie says:

      Amazing!! Important to note too that he has wise parents that were willing to share their advice. Thanks so much for sharing a wonderful story, Kathy. I’m sure you’re quite proud of him.

  4. Josh says:

    I always made sure I invested at least 6% in my 401k to get a company match. And I had a Roth IRA that my parents setup for me, that I put at least $100 on auto-invest each month.

    One day I want to get into day trading with small part of my portfolio, but I don’t have the time (or money) right now.

    • Laurie says:

      That’s great that your parents set up a Roth for you! We will definitely consider that for our kids. Great graduation present!

  5. We are still playing it really safe when it comes to savings and investments – even though I know that much more can be earned over the long term with “riskier” investments. I think that once we have a solid emergency fund saved up, along with savings for big upcoming expenses, we’ll be ready to plug our noses and dive into the world of investments.

Comments are closed.