Investing when you’re young sounds like an expensive and daunting task, especially when you have just started your first job, but the best time to start is with your first pay cheque. Given the choice, it’s much easier to put off the idea of investing and just buy the latest shoes and gadgets -this is the most common yet risky mind-set of a lot of young people.
There are plenty of investment options available that don’t require you to have millions. How much you save depends on what you want and what your goals look like. There are investment and savings options that require as little as R300 a month.
As part of the Global Money Week initiative taking place from March 12 to 18, empowering young minds on the importance of investing and taking care of their financial future is key to the agenda. Managing director at Itransact, Lance Solms, shares tips for you to get started as an investor:
Keep in mind that savings accumulate and the interest compounds, as long as the money is not withdrawn, so it’s wise to establish an investment vehicle early in your working life.
“Another reason to start saving early is that usually the younger you are, the less likely you are to have burdensome financial obligations: a spouse, children and mortgage, for example,” says Solms. “That means you can allocate a small portion of your investment portfolio to higher-risk investments, which may return higher yields. When you start investing while young, before your financial commitments start piling up, you’ll probably also have more cash available for investing and a longer time horizon before retirement. With more money to invest for many years to come, you’ll have a bigger nest egg.”
Know your goals
Whether you’re saving for a Michael Kors bag or a car, knowing why you’d like to invest your money and how you’d like to see it grow over time are both key to making sure you stay on the right track. List your goals so you can figure out how much they’ll cost and how you can use investing to achieve them. Once you know what you want you can start planning and saving accordingly.
The best way to learn about investing is to develop your skills through research and the use of virtual portfolios. There are plenty of platforms on the internet that enable you to develop your skills and make mistakes. Researching enables you to understand the complex financial terms and different investment options available to you before you seek advice from an expert.
Get help from an expert
As much as it’s important to get acquainted with the market, there are so many different investment vehicles to choose from, such as bonds, unit trust funds, exchange traded funds, property, and shares. Getting an expert such as a financial adviser to help you make the right decision is important. A financial adviser will provide you with expertise and knowledge you may not have. A good adviser will help you to reduce your financial stress and make the load lighter.
Cut down on your expenses
Saving and investing requires a lot of discipline. You probably aren’t saving because you think you can’t afford to. It’s as simple as changing a daily habit: if you buy a R50 lunch during work every day, if you took a packed lunch you could save R1000 a month. There are little things that you can cut back on that will find you saving up more money for you to invest. A little goes a long way.
“One of the problems that come with a lack of investing for most young people is the complexity of most products that would leave one confused and not knowing where to start. Smart, disciplined, regular investment in a diverse portfolio can produce good long-term returns for retirement and provide additional income throughout an investor’s working life,” Solms says.