If you’re in your 20s or even 30s, you need to seriously consider your future. Here’s why investing for young adults is a great thing to do.
Over 30 percent of Americans age 50 and above average more than $16,000 in non-mortgage debt. Credit card debt, medical bills, and other non-mortgage expenses burden many people near retirement age.
Only about 20 percent of workers have $250,000 or more for retirement. And while $250,000 sounds like a lot of money, it won’t take you through retirement, unless you plan on dying young!
Investing for young adults is crucial. Compound interest means a small investment today has a hefty return later.
It’s easy to put off thinking about retirement when you’re young. Your senior years feel far away. But investing now means less stress when you’re ready for retirement.
Looking at colleges? That’s smart.
A college degree makes you more attractive to employers. But don’t borrow thousands of dollars on loans you’ll never pay off. Look at your intended major carefully.
Want to be a lawyer? There are thousands of unemployed and underemployed lawyers who spent so much on their education; they’ll never pay it back.
Pick a major that suits your talents and skills. Then look for grants and scholarships. Take core classes at inexpensive community colleges for your first two years. Then transfer to a 4-year college.
The name of the college on your degree is from the 4-year college, but you won’t be neck-deep in debt. You should never spend more than 10 years paying off student loans.
There’s a good rule of thumb when it comes to borrowing money for college. Don’t borrow more than you expect to earn your first year after graduation.
Your First Job
You’ve graduated from college, and you’re in your first job. Congratulations!
Now the investing work begins. You’ve sat through onboarding and listened to the Human Resources manager explain your 401K.
Boring, right? Wrong! The decisions you make now affect you for the rest of your life. This is your first big chance at investing for your future. Take advantage.
Save as much into your retirement fund as your employer lets you. Most employers match funds to a certain point in your account.
If you put in 6% of your paycheck, your employer will match with a percentage of their own. The amount varies from employer to employer. Not all employers match funds, but many do.
If you’re working freelance or a job that doesn’t have a 401K or IRA, open your own IRA or Roth IRA. Divert a certain amount of your pay into the account every month.
Invest in Your Future
Take a look at your retirement account. Most accounts are managed and come with a financial adviser. Talk with the financial adviser and learn how your account works.
You’ll have a chance to invest some of the money in your account. This is critical. If you let the funds sit in cash, you won’t make as much money over time.
Investigate the types of investment funds available to you. Index funds are a great way to earn interest over time. And don’t panic if the stock market makes a downward correction.
You’re in this for the long haul. When the market goes down, do not pull your money out. A downward correction is a great time to buy more stock shares.
It’s almost impossible to predict the market. Investing in individual stocks is tricky, but some stocks are obvious winners – View here. Leaving your money in mutual funds and index funds works best in the long run.
Also, if you’re buying and selling a lot, you’ll often rack up fees. Understand all fees associated with your retirement investments.
Beware the Credit Card
Credit cards are good for building credit but use them wisely. Remember that compound interest that helps you earn for your future? The same interest wipes out your savings if you maintain a balance on your credit cards.
Pay your credit cards off every month. If you can’t afford something, don’t buy it. Being in debt is no fun, and it can take years to pay off large credit card debts.
If you pay only the minimum balance on a credit card, the debt continues to grow. Create a budget based on your pay and stick with it as much as possible.
Get a credit card that offers benefits. Look for a low-interest card with no annual fee that offers reward points. The points can be airline miles or even cashback points.
Use the card for all your purchases, but stick to your budget. Then pay the card off each month. You’ll earn points or cashback without paying interest on your purchases.
Your Significant Other
Money is a big reason why couples split. Make sure your partner values money and saving for retirement as much as you do before you get involved.
People have significant issues surrounding money. Understand your own issues and make sure your partner addresses his or her issues as well. Don’t be afraid of looking at your budget and figuring out where you need help.
Many people sweep their financial issues under the rug until they’re so far in debt bankruptcy is the only option. Investing in your future means working on it now.
If It’s Too Good to Be True
Beware of people trying to talk you into shady investment deals. If something sounds too good to be true, it usually is! Stick with your investment plan.
Never raid your investment accounts for emergencies. You’ll pay heavy penalties and taxes. Instead, put a small amount of each paycheck into a rainy-day fund. This is a regular savings account where the money is easily accessible.
Investing for Young Adults
Investing for young adults is crucial. Don’t leave your retirement to chance. Take control of your finances and make smart choices. Beginning with your first job, save a portion of each paycheck into a retirement fund.
Put a little money into emergency savings account each month as well.
Be smart with your money and don’t rack up credit card debt. Remember, it’s a marathon, not a sprint. Taking little investment steps now adds up to a secure future later.
Are you looking for more good advice? Take a look at our business articles here.