Start Investing in your 20s

During those precious years of the twenty-somethings, many embark on life’s most wonderful experiences, ranging from college graduation to starting a family. It is also during the 20’s that a person should begin saving and investing for their future.  Starting in your 20’s, you put yourself in the position of being able to capitalize on your lifelong earning potential. Money you invest now will grow along with your income and if left untouched, or better yet, unspent, these funds may become substantial when you approach retirement age. As a matter of fact, any goal you have for your future may benefit greatly from your willingness to begin investing in your 20’s.  Here are a few tips to help you get the ball rolling on your path towards financial security.

Set Goals

No plan will be effective if you do not have goals. Set financial goals pertaining to where you want to be at different stages in your life. When do plan on purchasing a home or new car?  Where do you potentially envision yourself living?  Do you plan on returning to school?  When would you like to retire?  Questions like these will give you a clearer view of how and where you want to save and invest your money. Make sure to quantify your goals as well. Giving specific percentages or amounts will help you to assess easily where you stand in relation to accomplishing your goals.

Maintain an Emergency Savings

You should always set aside money in case of emergencies. Having an emergency savings account will protect you against having to spend recent income of life’s surprises. This helps you to avoid being put into a bind when regular expenses still need to be paid. Also, with the uncertainty of the economy, having an emergency savings account equal to about six to eight months of income will help get you through times when unemployment can be a possibility.  You may have to live off of the cash you have stored away. The importance of an emergency savings account can not be understated.

Pay Down or Pay Off Debt

Debt, especially credit card debt, can cost you more in the long run.  Interest can amount to a large portion of minimum monthly payments, making paying off the principal amounts a long and arduous task. However, if you want to free up more money to invest, paying off debt as quickly as possible will surely help a great deal. Also, try your best not to accrue any more debt. Live within your means. If you can not afford it with cash the day you see it, then you do not need to purchase it at all until you can. 

Look to Employer’s 401K Plan

Your company’s 401K Plan may be your first venture into investing while you’re in your 20’s. Taking advantage of this employee perk will help get you started in preparing for your future. Most companies that offer 401K or similar plans offer to match the amount you put into the plan up to a certain percentage. This is almost like getting free money or a raise. You will actually be saving more than what you elected to contribute with your employer’s help.

Adding these tips to your plan for investing in your 20’s will have you well on your way towards financial security and prosperity. Don’t wait too long to start utilizing these tips. Although you can start investing any time during your life, by waiting you miss out on years of compounded interest or capital growth. Starting in your 30’s leaves you with ten less years of growth potential. Take advantage of your youth and start investing today.