When you’re caught up in the day-to-day whirlwind of emails, meetings, group texts and dinner dates, it can be hard to find the time (not to mention the money) to start planning for the future. But if you start saving and investing early, you’ll have more time to grow your money, and more time to recover from missteps along the way.
Here are a few tips to help you get started:
1. Keep an emergency fund.
It’s impossible to know when an emergency will happen, but it is possible to plan for it. Anything you can put into your emergency savings fund, however small, will help you cover surprise costs. We recommend making automatic savings deposits from your paycheck each month, so you don’t even have to think about it. You could even consider putting your money into a high-interest savings account, certificate of deposit (CD), or money market account – all of which can help you get more bang for your buck. There’s no set rule for how much to put in your emergency fund, but a good goal is to save enough to cover three to six months’ worth of your take-home pay. Ambitious, we know. But you got this.
2. Get in the habit of saving for retirement.
Retirement planning might feel ages away, but the key to securing your future is to start saving early. The sooner you start saving money, the more comfortable and enjoyable your retirement will be. The good news is, there are plenty of options out there to grow your retirement savings. Many employers offer 401(k) options, and some may even match your contributions up to a certain cap. If a 401(k) isn’t an option, you could also consider a Roth IRA. With these accounts, your contributions are taxable when they’re made. But then, when it’s time to withdraw the money, it’s tax-free. Roth IRAs also have an income limit, so it’s a great option for young people who are still in the early stages of their careers. Figure out how much you need by experimenting with our retirement savings calculator. And if you need help getting the ball rolling, check out our tips for building good retirement savings habits.
3. Invest in the stock market.
Did you know that 61 percent of Millennials say they’re afraid to invest in the stock market? However, investing can actually offer significant gains if you stick to a few basic rules. If you’re new to the stock market, here’s what you need to know:
Stock: A stock is a partial ownership in the assets and earnings of a company. Companies sell these shares to investors to make money they can use to expand their business, while stock owners share in profits based on the percentage they own. A rule of thumb is to buy stocks when they are priced low, and sell when they are priced higher than when you bought them.
Types of stocks: There are two categories of stocks: mutual funds and individual stocks. Mutual funds are when you purchase small pieces of many different stocks in a single transaction. An individual stock, on the other hand, is a single share or more in one stock. Individual stocks can be more risky than mutual funds, but they can also turn a greater profit if you happen to be in the right stock at the right time. For beginner investors, though, it tends to be better to choose mutual funds because they spread your investment (and therefore your risk) across many stocks.
Brokerage accounts: To buy stock, you need to open a brokerage account. The process is similar to opening a bank account – you’ll need to fill out an application and provide proof of identification. Choose your broker wisely, considering things like how much money you have, how frequently you plan to trade your stocks and how much support you’ll need.
Got questions? Conenct with one of our Summit Financial Advisors. We’re are always happy to chat about savings, retirement, investments or anything else that’s on your mind.