InvestYour 20’s are the best time to begin investing your money

It’s true that millennials have a tendency to want to put their money toward anything instead of socking it away — from clothing to concerts to a night out. In fact, only 28 percent of millennials believe that long-term investing is an important path to success, compared to 52 percent of non-millennials, according to a UBS report. But the truth is, your twenties might be the best time to begin investing money.

“The sooner you start saving and investing, the easier it is on your budget,” says Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation. “The sooner you start, the less you have to save because you have time on your side.” That’s because money invested throughout your 20s will continue to gain interest. Think of it this way: Investing a mere dollar at age 25 could be more than five times as valuable as doing so at age 45.

So how can you start investing? It might be easier than you think. Take these first steps and you’ll be on your way to meet your retirement goals:

 

1. Evaluate your current financial situation. It’s important to not jump right into investing if you can’t afford to do so — that won’t help anybody.

“If you don’t have at least three to six months’ [income] in a cash reserve account, I don’t think you should start investing,” says Dominique Broadway, a financial planner, personal finance coach and founder of Finances Demystified and the Social Money Tour. “You don’t want to lose your cash cushion or emergency fund.” So if that’s the case, save up a reserve and then take on investing.

 

2. Put away 10 percent of each paycheck. Or as much as you can. The key here isn’t so much about what amount to put away but rather understanding to do it now, because time is on your side. Even if you’re just setting aside 5 percent of each paycheck, the amount, over time, will blossom into a good-sized amount in retirement.

“Building habits, especially in your 20’s, is so important for long-term success,” says John Deyeso, a certified financial planner.


3. Start a 401(k) or IRA. Many jobs offer a 401(k), and if yours does, you’ll definitely want to take advantage. A 401(k) allows employees to contribute a percentage of their paychecks tax free. Try to invest as much as you can into a 401(k), and take advantage of whatever your company will match. If you don’t have access to a 401(k), you can open an IRA. It’s important to open one of these accounts in your 20’s. In your 30’s, you can contribute twice as much and still not have as much as if you’d started in your 20’s.

“Every $1,000 saved in your mid-20’s grows to over $10,000 at retirement, assuming 6 percent growth every year. But waiting until your mid-30’s means that same $1,000 will only grow to $6,000,” explains Shane Leonard, a chartered financial analyst and the CEO at Stockflare.

 

4. Don’t be afraid of risks. When you’re young, you can risk jumping at every opportunity and not having them work out, because it gives you more leeway for a reward later in life.

“You may need to take risks when you’re younger,” says Erin Baehr, author of “Growing Up and Saving Up.” “You may take one job over another and find it doesn’t work out. But when you’re younger, you have the ability to do that. And then that can parlay into a bigger return down the road.”

 

 

Investing early should pay major dividends in the future. Any questions? Leave a comment below or stop by your local Community 1st Credit Union location to speak with one of our representatives today.

 

Until Next Time,

Jessica M.

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