Money is a subject I haven’t talked about before, but I do think that learning to manage it at an early age is an important part of designing the life you want. I won’t claim to know much about the finance world, but something about saving my money gives me a bit of a high. Investing it is even better because I know somewhere down the line I’ll (hopefully) be able to afford that dream kitchen I talked about yesterday. My sister, Katherine, is a finance guru, well at least in my eyes! I asked her to share a bit of her investing advice since I think plenty of us are just plain clueless. Hope you enjoy it!
My older sister is a wiz when it comes to web design, cooking, decorating, and plenty of other things that I don’t have a knack for. In my family, I’m the math brain, which is not too exciting, but it does give me a knack for something else. I recently graduated from Auburn University with a degree in Finance and I worked at Obermeyer Asset Management as an intern during the summer. By no means am I a professional, but I have learned a lot throughout the past few years.
Everyone always asks, when should I invest? What time is a good time to enter the market? I asked as well. The answer I was given was ‘Now! If you have excess money that will not be needed in the foreseeable future, then you should be investing it.’
By putting your money into a savings account, you do receive a small amount of interest, however, it will not cover the rate of inflation. This means that by putting your money in your savings account only, the inflation rate will pass it by. This may cause your money to not work for you.
Reasons to Invest Now:
- The younger you are, the better your return will be in the future. I don’t want to confuse anyone with the math, but I am going to give a simple example. Say you invest in a mutual fund that returns about 4% (a fund that is invested in many companies so you don’t have to take extra risk) starting today. If you invest $200 each month for 30 years (maybe setting money aside for retirement), you would have a return of $138,810. However, if you wait 10 years to start investing with the same payments and rate of return, your return would be far less. $73,355. Say you increase your payments to $300, you would still have a smaller return. The numbers can be adjusted however you like, but the point is, investing now in smaller monthly amounts will be easier on you now and later.
- If you think investing is risky, you are right. However, there are many different things you can invest in. Equities, mutual funds, bonds, commodities, futures, options, and the list goes on. The best way to protect yourself from risk is to diversify your investment portfolio, meaning invest in many different things so that your risk is spread out among all of them, not in just one thing.
- It’s easy to get help with investing. You can search for financial advisors through Schwab or Fidelity (just a few examples). They can help you set up an account and find the right investments for you and your current financial situation.
This is a very brief glimpse of what investing can do for you. The economy and the future are uncertain, so start preparing now. What could be a better New Year’s Resolution than, “I worked hard for my money, so this year, I am going to MAKE MY MONEY WORK FOR ME!”
