3 Financial Planning Tips for Young Adults

1. Keep an emergency fund.

2. Get in the habit of saving for retirement.

3. Invest in the stock market.

• 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.