There are many aspects to financial literacy, and of course one of them is to learn how to get started with investing. Or learn more about the topic if you are already making investments. As even after you start an account, it is often a life long learning process as the markets and financial products are always evolving. This means it is always important to keep learning about investing, portfolios, risk, and saving.
While there are a number of things that should be done first to establish a solid financial footing, such as having emergency savings or paying off higher interest debt, eventually everyone needs to take the next step if they hope to increase their wealth. Everyone needs to learn about investing, especially kids and teenagers as they can benefit the most from it if they start early. As investing for long term financial success is required in order to retire, start long term savings, save for a college education, and other life goals. Below you will find some terminology as well as straightforward tips that will help increase your knowledge.
Find how anyone can get started investing, even including kids, single moms, teenagers or low income families. Yes, they too can also start to invest or save. The truth is that anyone can get started with any dollar amount, or even less than a dollar by using free Round Up type investing programs as well as smart phone applications. Find how to start to invest.
Or learn how to develop and increase your overall financial literacy when it comes to stocks, bonds, ETFs, and other terminology. As anyone that starts to invest needs to develop some basic knowledge on the concepts. Also learn about compound interest, which is probably the most important thing to know.
As noted, this is just one part of increasing overall financial literacy. But it is so important – as investing properly can help build wealth or even help you avoid losing money over time. Learn more about ETFs, mutual funds, compound interest, index funds, and other key investing concepts.
Investing for children and teenagers
The younger someone starts to invest the better. They can benefit from compound interest of both their initial investment as well as any additional money that may be added to an account over time. Stock based investments, which can be a great option for kids and teenagers, often average high single digit percentage growth per year. Making small investments while young means that money can grow.
Younger investors can benefit from compound interest. A quick way to see how quickly the investment may double in value is known as the Rule of 72, and this is a factor of compound interest. Together these 2 financial literacy terms are so important for teenagers, students, and youth to know. Learn about Rule of 72 and how long investments take to double.
Investing when you have a low income
It does not always seem possible to do, but it is possible for low income families or people living paycheck to paycheck to invest for their future. They can use free apps that round up change and invest that money, use automatic savings as well as other tips and tricks of financial literacy to save and/or invest money. A number of technology tools, discount brokerages, and other resources can help start the process. Find how to invest on a low income.
Some people may have money available to them to invest, but they do not want to rush into investing. Maybe they want to start to slowly invest their money in order to learn about the markets/investing as well as to limit their risk. There are a number of tools, brokerages, and applications that allow people to invest into the stock market even if they only want to start small (or have) limited funds available to them. It is possible to buy Exchanged Traded Funds, stocks, commodities, and mutual funds (among other assets) using very minimal funds or your savings. Get started investing with little money.
Exchange-Traded Funds, or ETFs
Many new investors have questions on ETFs and how they work as well as the pros and cons of them. As the industry and number of options out there continue to grow at a rapid rate. A few main parts of financial literacy as well as long term stability are cutting costs, saving money, and growing your investments over time. ETFs can help with all of those goals, especially since most brokers now offer them commission free trading. Learn more about ETF – Exchange-Traded funds.
Another option for investors, whether beginners or experienced investors, is mutual funds. These are investment vehicles that are used by tens of millions of families, businesses, brokerages, financial advisors and others around the world. Mutual funds pool investors money together and buy stocks, bonds, real estate, international stocks, money market funds, and many other types of investment. They often have minimal costs to get started, provide diversification, and have other benefits. Knowing the basics of mutual funds is a critical investment skill. Read more on mutual funds.
Risk of Investing
There is always some form of risk when investing. There is no such thing as a promise or guarantee. You can lose some money, not get a certain return, or lose your principal investment. the fact is nothing is guaranteed in life.
Unfortunately there are often promises made as well as too many scams and fraudsters. Financial literacy can give you the skills as well as ability to to to stay away from investment scams and schemes. Learn how to do the research and investigate any offer or promise made. Find how to identify investment scams.
Emotions also play at risk when it comes to investing. Financial literacy will teach you that most people do not beat market returns. Often do to emotions or other poor decisions, they often sell when markets are lower and buy when markets are higher, which is the opposite of which should be done. Find information on not letting emotions control your investing decisions.
By Jon McNamara