It is always a good time to start investing your money. Find different ways to invest, how to get started, and learn about all the options you have available. If you’re building your finances and have a good amount of savings, or if you are living paycheck to paycheck, it is always a good time to start. There are even ways for teenagers, single moms, students, or low income families to get started with investing for their future.
The earlier you start the better as it gives your money more time to grow. Making investments is something that can set you up for the future, whether it is retirement, a goal such as buying a home or paying for college, or any other financial goals you have. Instead of leaving your money lying around and not “working for you”, you’ll be earning more money all the time.
There are many different ways to invest, and you can use as many of them or as few of them as you want. Some investments are high risk but can also yield huge rewards. Others are low risk, and some only require a little investment, making them a great way to start for someone new to investing or who has a limited income. Here are several smart yet simple ways to start investing your money.
Easy Ways to Start Investing
There are countless types of investments. They all have pros, cons, different levels of risk and complication to them as well as many other things to consider. It is never too early to start investing though, whether for emergency savings, retirement, or even as a side business or passive source of income. As the sooner you start the more time you have for your money to grow from concepts such as compound growth and annual returns. Some of the main ways to get started investing, no matter your age or knowledge, include the following.
There are also ways to start to invest using very little money. This can be a great option for a low income family, a teenager or maybe someone who wants to slowly buy stocks, real estate, mutual funds/ETFs, or to get involved in the stock markets. Many brokers allow fractional shares to be bought or sold, have free commissions and initial investments needed, and offer other forms of help. Many retirement accounts allow low cost investing as well. Find how you can use little money to buy stocks.
1. Invest Your Money in a High Interest Savings Account
Before anything else, you should make sure you have a high-interest savings account that is FDIC insured. All this requires is that you put as much money as you can into it and you can gain a little extra cash each month. It can (should?) also serve as your emergency savings, which is critical to have as you improve your financial literacy as well as stability.
Having a savings account has many advantages for you financially. Just starting to do this will encourage you to save more money rather than spending it. There’s also no risk with a savings account; it keeps your money safe (provided you use an FDIC insured account) and earns you extra interest. You might already have a bank account, but make sure you check both your lender for what options they have and other banks (including online ones) to get the best savings account possible with the highest interest rate and lowest (or no) fees.
Savings accounts often have different terms and conditions. For instance, some allow you to access your money at any time, whereas some give you a fixed rate for investing a certain amount each month. It can often help to open multiple accounts to gain extra interest or to even get a sign up bonus from the bank or lender. While interest rates vary, you can often earn up to 3 percent on the cash you save. While it may only be a small amount, it can build up over the years. Find examples of compound annual growth, and how consistent investments will grow over time.
2. Invest Your Money in Stocks or Bond Investments
When people think of investments, they’ll often think of stocks and bonds. There are many ways to buy stocks in a business or organization which can grow over time and hopefully get you big returns on your investment over time. There are mutual funds, ETFs, S&P 500 index funds, municipal bonds, and many other types of equity or bond investments. Of course they can also be used in a retirement plan (see below).
Many people visit brokerage offices or even turn to online brokers to start investing in companies or an option such as an Exchange Traded Fund. Or they use investing apps on their smartphone. The fact is that it’s now easier than ever with websites and apps like Robinhood, which allow you to make investments from home, the office, while you commute, or really from anywhere. Before you make any investment, do your research. While any investment comes with risk, do your best to make sure the stocks or bonds or funds you’re investing in are from organizations with the potential to grow and gain value. Be mindful and aware of scam investments too.
Bear in mind that investing in stocks and bonds is a riskier way to invest your money. Companies can fall in value or even go bankrupt, which can involve in you losing your money. However, when you invest wisely, it’s something that can result in huge returns over time. Even consider dollar cost averaging to ease into this type of investing. Or maybe even big returns in short order – but as financial literacy teaches you, the higher short term reward the more risk in the investment.
You can also invest in equity or bond funds. These are managed investment portfolios where financial experts focus on sound investments to help your money grow. Although these still have the same risks, they’re generally a much safer bet than investing in stocks yourself.
3. Invest Your Money into a Retirement Plan
If you want to prepare yourself for retirement, you need to start to invest your money as soon as possible for it – the younger the better. There are a number of different retirement plans and methods to save/investment for retirement. In the United States, you can open a 401(k) of 403(b) through your employer. Or some employers in the US offer pensions in which you can contribute (invest) more than the company gives you. Or you can use an IRA or SEP (if you are self-employed). Similarly, in the United Kingdom, you can open a pension. These are like long-term savings and/or stock based investment accounts where you can access the money after you retire or hit a certain age.
Although it may a long time before you see your money again (depending on your age), you only have to invest a small amount each month in order to really see the money grow over time. A stock or bond type investment should hopefully even increase more in value (see stock/bond investments above). Over time, this money will accumulate. Many pension or other employer retirement plans (like a 401K) also involve your employer paying an extra percentage on everything you invest.
Retirement plans can ideally help keep your money invested and “working for you” for a long time and set you up for retirement. What’s more, your earnings will grow tax-free, resulting in better financial health over time.
4. Are You Low Income – You Can Start Investing Too
About 40% of Americans have less than $400 in emergency savings and a similar percentage can’t come up with $1,000. They may think they can never start to invest for their future or save for retirement. There are tens of millions of Americans that live in poverty or close to it – they may wonder how they can ever start to invest. But there are many ways that they too can get started too, often with very little cost.
Many banks, lenders, and “fintech” companies offer simple, very low cost or free ways to start investing. Start with your spare change or dollar or two. Or round up your shopping to the next highest dollar amount, and that spare change can be invested into a stock, bond or some other investment. There are free quick and simple smartphone apps, websites, and other tools to use. Financial literacy is all about just starting to invest and let your money work for you over time. Find easy ways for low income families to invest.
5. Invest For Your Kids Future or Knowledge
Most parents want their kids to do well in life, even better than they did. So they teach their kids about life, try to set a positive example for them, and do their best to guide them. Of course parents will help invest in their kids education, by paying for all those school supplies over the years, after school activities, or even college. But you can also help your children learn about financially literacy, and invest for or with them into stocks, bonds, or other investments. Find investment accounts that can be set up for kids.
Parents can get their kids financial literacy games. They can be for the kid/teen to play themselves, or the parent can also participate and learn about/improve their financial knowledge as a family. While this is not a “dollar or cents” type investment, knowledge and education is just as important if not more so for youth. What this does is it invests in your children so they have more skills and can make educated decisions about their own personal finances.
6. Invest Your Money in Property/Real Estate
Investing in property is another way to invest your money, and this also includes investing in your own home, a rental property or a house for you to live in. Some experts say, if you do it correctly, that is can be one of the safest and smartest ways to invest your money as you have a “tangible” asset – a house or some other property. Although it’ll take a large heap of your savings, it’s something that can grow significantly over time. Plus, it’ll give you a place to live, and you can even earn extra money from your property.
Of course, buying an apartment or house costs a lot of money. However, you can use a mortgage to handle the costs. You can pay off your property over numerous years and, by the end of it, it could be worth tens of thousands more. As a side note, a mortgage loan is good debt to have, as a property will appreciate in value.
The best way to do this is to find a property in an area with a lot of potential for growth. Consider areas where you’d like to live as well as work but also areas with regeneration plans and areas with a record of growing in value. Look for regions with high quality or improving schools as well, as those often directly correlate to increasing real estate prices. These will generally give you the best return on your investment. But be mindful of “housing bubbles” though, which are where housing is un-affordable to the masses.
Homebuyers will gain the benefit of having a place to live. You can also work on improving your property, which will increase the value even more if you plan to sell in the future. However, some people also buy properties to let them out and make the money back over time, and those are rental units. You could even rent out a room or turn your basement into an apartment and rent it out on Airbnb or another homesharing service. All in all, there are many ways to make money from property, and it’s a great way to tie your money up somewhere where it’ll gain value.
7. Self-Employed Start Investing for Retirement
It can sometimes be a challenge for self-employed workers to save for retirement. The options are limited and they do not get benefits from a corporate employer. However gig workers, freelancers, and those who work independently for themselves do still need to save and invest for their future as financial literacy growth and development mandates.
There are options out there. They include SEP, solo 401K, pensions, regular IRAs and other accounts. Each of them have certain limits in place, but self-employed contractors and others can use them. They can even be combined with employment retirement benefits. Find details on retirement plans for the self-employed.
8. Invest Your Money in Collectibles
An interesting way to invest your money is to start buying collectibles. There are many types of them. In general, collectibles are items which are expected to appreciate in value over time. If you build up a collection and hold onto it for many years, you could end up making returns from selling them in the long run.
Popular collectibles include art, wine, whiskey, playing cards, jewelry, and coins. The good news with them when it comes to financial literacy is that some people can even acquire those items just as a hobby as they have an interest in them. You could even go for more unique collectibles such as toys and video games. There are countless types.
For some people, collectibles are simply something they buy as a hobby. This helps make the process interesting and fun, and you are not just counting on them appreciating in value as that does not always happen. Either way, collecting these goods can result in you making more money than you spent years down the line.
Collectibles are a fairly unpredictable investment. You never know how much something will be worth in years to come. However, if you enjoy collecting for the fun of it, you can feel comfortable investing some money, knowing you could potentially make the money back with interest later in life.
If you want to start investing your money as part of a financial literacy program, you have all kinds of choices. Everyone should start with a savings account (or multiple savings accounts) so that any money you have lying around will gain interest as well as be there for you in an emergency. If you have the funds for it, buying stocks, bonds, or property (such as a home for you and your family) are some of the most common ways to get started.
There are always risks to investing – no one is guaranteed to make money or a certain return on their investment. Of course, you can also go for other options such as stocks and shares. While more risk is involved, it can result in larger returns over time, mainly due to compound annual returns. There are also many other options, such as collectibles or even investing in your own business. Whichever way, the earlier you invest your money, the better.
By Jon McNamara