Young people who are fresh out of college don’t think much of their financial future. But the 20s are the best time to lay the foundation of your financial future. To do this, you’ll need to start investing.
Investments sound something like your parents would do but, with a steady income, you should be able to start putting money in the right places so that you can see its value grow. Here are some good things to invest in:
Start on Your Retirement Savings
You might just be starting your work life but you should seriously start putting money into a retirement plan. It isn’t important what plan it is as long as it is dependable. Starting to put money into a retirement plan at 25 is much better than starting ten years later.
There is a big difference between the amount of money saved and the money earned. For example, early investors will have years of annual returns and savings piled up. You can expect double or even triple the results of those who started later.
Invest in Funds
When you are young, one of the resources that you have is time. Use that to your advantage by focusing on investing in growth-oriented funds. With years ahead, you can turn that growth to large profits for yourself. For example, if you invest in funds that have a 15 percent return every year and wait 40 years, then, you have a staggering amount waiting for you as the amount compounds annually.
The growth funds tend to be risky though. As young people, you are better able to absorb and losses and drops in value. You can ride through the fluctuations in your investment instead of pulling out.
Buy a House
Buying a house is a big financial milestone. Instead of throwing your money away on rent, you are building equity as the years pass by. The longer you live in your home, the bigger the chance that it’s value increases. Assets such as homes are proof against the usual fluctuations of the market and you can sell them later if you decide to move. But it isn’t a sure thing though. If you are single, a home may be a bit too much for you.
Additionally, you may only want to buy a house if you plan to stay in an area for a long time. Think about this decision carefully since you will be putting quite a bit of money into it.
Certificates of Deposit and Other Savings Products
Normally, just saving money in the bank is not enough. The interest rate in savings accounts is too low to be profitable. But banks do offer more effective savings products. The most common one is the certificates of deposit that allow people to deposit their money for a certain amount of time.
The advantage is that the interest rate is higher. The problem is that it locks up your money for a certain amount of time. You won’t be able to touch the assets or you’ll face problems. But they are perfect for newbie investors since they are easy to get.
Investing early is always a smart move. It gives you a head start on all of the financial challenges you will face in the future. With your assets growing every year, you can be sure that the future will be much easier for you.