Your 20’s may not seem like the right time to start making financial investments. You believe that you have plenty of time and your time will be better spent planning your career, finding a mate, and making other major life decisions.
But while you may have plenty of time to save for your retirement, you are well-advised to start making financial investments in your 20s. You are building the foundation of your savvy financial habits and your nest egg, both of which are crucial for your enjoyment of your retirement years.
Choose Compound Interest
Between a simple interest and a compound interest for financial investments, you should choose the latter. You will be more motivated to save and invest when you know the power of compound interest, which is defined as the interest added to the principal amount so that the interest itself earns interest from then on. Think of it as literally doubling your money in just a few years.
Ask your financial adviser to show you the range of financial investments that have compound interest for your consideration.
Increase Your Contributions Every Year
Your contributions to a retirement fund are a form of financial investments. Contributions to a retirement fund are actually the most commonly advised investments for employed individuals. But don’t just stop at the minimum contributions required but instead increase your contributions every year, if the pension fund provider allows it.
Generally speaking, the higher your contributions at the present, the higher your pension in the future.
Diversify Your Investments
Avoid putting all of your eggs in one basket. You should make your financial investments as early as in your 20s but also be sure to diversify early, too. At this age, you can still afford to take on higher risks with your investment portfolio than when you are in your 50’s or 60’s.
Look beyond shares and bonds as your financial investments. Take a look at commodities, futures, and indexes, too, with a few liquid accounts (e.g., bank savings) on the side.
Even with your modest salary, you can still make savvy financial investments with good rewards that you can reap in the future. To achieve such a goal, look into reining in your spending, paying off your debts, and cutting up your credit cards to prevent a debt pile-up.