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Millennials, You Should Start Investing. Here’s How To Do It

jar of coins on desk. man uses calculator to determine income
Turn small savings into big wealth.

Millennials are broke. So says common knowledge. Of course, it doesn’t have to stay that way. One method to combat low wages and secure a financial future for yourself is to start investing. Contrary to popular belief, investing isn’t just for the rich or the already financially established. Young people who have a little bit of extra money lying around should know that they can turn those small amounts into something much bigger with some work and careful planning.

How much money are we talking?

It’s not reasonable to expect to become a millionaire overnight. However, amassing $1 million dollars over a period of time is not impossible. In fact, if you play your cards right, it’s definitely within reach. In a guide for investors in their 20s, NerdWallet says that if you start at age 23, put away $14 a day into an account with 6 percent return and annual compounding, you’ll have saved up $1 million dollars by age 67.

According to those same calculations, starting at a later age can actually disadvantage you. If, for example, you were to start saving at age 30, you’d need to put away $21 a day to reach the same goal by 67. Start at 35, and your daily contribution need to be $30. As you can see, the earlier you start, the more time you have for your investments to grow.

What are the options?

There are many. Here are a few for budding investors to get started. One popular method involves apps like Stash and Acorns that automatically round up purchases and invest spare change for you. The downside is that you’ll get limited options and may not see a high return on your investments.

Other options to consider if you’d like to start trading more actively and seriously are index funds and exchange-traded funds. Like Stash and Acorns, buying into these saves you the time of researching stocks, and they operate similarly. Index funds act as a sampler of an index, which monitors the performance of sections of the stock market, while ETFs can track more than just indexes.

Retirement accounts are another option. Two popular accounts include IRAs and 401(k)s. Though specifics differ, these plans will generally spare you from paying all the taxes you normally would on income that’s contributed to them. Real estate is another smart investment option, but you’ll need to be fairly financially secure and willing to spend a large chunk of money on a mortgage. Still, the payoff, as with most of these investments, can be huge.

Takeaway

The fact is that riskier investments can often yield more money. Don’t forget, though, they’re also riskier. Putting your money in stocks, for example, is inherently more of a risk than putting money in bonds. Stock values can fluctuate wildly over time, while bonds likely will accumulate value slowly. Not many young people are risk-takers these days, but if you want to aim for large sums of money, taking charge of your investment strategy by adding some higher-risk items alongside those of lower-risk likely will go a long way.

At the end of the day, it doesn’t matter if you end up wealthy. What matters is making sure you’ve got money in the bank down the line. If you start investing from an early age, you can ensure that happens.

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