5 Tips For Investing in Your 20s
Updated: May 9, 2022
When you’re a fresh graduate starting in the corporate world, you may not always be making the smartest financial moves and investment strategies.
For many young adults in their 20s, balancing a full-time job and a social life is already hard as it is, even more so if you’ve to think about your finances.
With student loans and everyday expenses welcoming young adults after graduation, there’s no surprise that many of them put off savings and investments.
It’s hard to overstate how valuable it is to start making wise financial decisions while still in your 20s. Developing the habit of saving early is crucial to building a nest egg that will make your dream retirement life come true.
Take this as an example: if you were to save $14/day starting at age 23, you’ll have $1 million by the time you’re 67 years old. However, if you were to wait until you’re 30 before saving, you’ll have to save almost $30/day just to have the same amount by the time you’re 67.
If you’re wondering about how you’ll be able to save enough to accomplish your goals of perhaps one day owning a home or saving up for a wedding, today’s blog will answer that.
We’ll share tips on how to start investing and growing your money as a young adult.
The first step: take inventory
Before setting goals for the future, you always have to start by taking a look at your current financial state and spending habits.
It can be as simple as listing down your monthly salary, regular expenses, and leisure spending.
You can know if your budget is working by using the 50/30/20 rule: 50% should go to your needs, 30% for leisure, and 20% towards your savings.
If you’re not able to set aside even a small portion of your income for savings, don’t worry! That’s the case for most young adults, so you’re not alone.
Even if your monthly payout doesn’t allow you to save a lot right now, even a small amount every month will go a long way over time.
Here’s a saving tip: by automating the process, a certain amount of money will be taken out of your payroll account and be put directly in your savings account every month. No hassle at all!
Decide on your financial goals
Let’s be honest: your goal of earning money as a young adult likely is to have something to spend whenever you feel like it.
There’s nothing wrong with enjoying your youth, but it pays to give yourself some time to think about what you want to achieve in the future.
For some, the future means having the capacity to pay off their student loans and being able to travel to different places.
Others aren’t fans of the fancy things in life and simply want a place to call their own and a family to grow old with without worrying about finances.
When setting your financial goals, ask yourself these questions:
What is your goal for this money?
When do you want to use the money?
An ideal first saving goal for young adults is to have at least 6 months of living expenses in an emergency fund. Once you’ve achieved that, it’s time to look at other options like retirement plans and investments to secure your future!
As someone in your 20s, here are the potential assets you can invest in:
Understand your risk allowance
The best thing about investing in your 20s is that time is on your side.
If you make mistakes along the way, you have a larger window of time that allows you to recover from all the possible losses.
Committing a massive investing oversight in your 20s is different from making one when you’re 50 because of risk tolerance.
Risk tolerance refers to the level of risk you’re willing to take to reach your investment goals. When you’re young, you have a larger risk allowance because there’s more time to reach your investment goals.
The earlier you start investing, the faster you’ll learn the ropes of the complicated world of investments.
By the time you’re 40, you’ll already have the best saving and investing strategy that grows your assets without huge risks looming.
Be consistent with your investing strategy
Following a consistent saving and investment strategy in your 20s can pay off in the long run.
Even if you’re unable to invest large sums of money, if you know how and when to invest, you’re bound to see growth in your savings.
These small amounts will add up as the years pass, so no amount is too small when you’re investing!
Learn more alternative investments
Stocks, bonds, and ETFs are considered staple investment options for beginners, but there are plenty of investment opportunities outside the stock market as well.
Some examples include cryptocurrency, precious metals, commodities, and real estate.
You may even have more luck with real estate because it doesn't depend on the stock market movement. If the stock market isn’t looking good, real estate may continue performing well.
It’s all about exploring the best options that will make your assets grow.
Growing your assets as a young adult
There may be no better time to start investing than in your 20s!
While you may not be capable of investing large sums of money now, your main advantage is the large time horizon because it will give you the time to experiment and learn the best strategies that work for you.
If you want to talk to an expert about investing strategies, or simply want advice on how to start saving as a young adult, don’t hesitate to send us a message! We can connect you with experienced financial advisors who can help you reach your financial goals!