Investing in Your 20’s: 5 Financial Planning Questions Answered

analyzing investments in your 20s

Investing as a young adult is the best way to ensure you get to enjoy financial security later on in life. Buying your forever home by using a home affordability calculator and keeping an eye on mortgage rates, paying for a wedding and feeling secure when you retire are all made more achievable with a healthy investment portfolio. But how can 20-year old’s have the funds to start investing when they’re just starting out in the real world? What are the best options for those that want to get started? How much money do you need to have to get started? Let’s answer some of the most common financial planning questions for young investors.

What Should You Invest in?

Choose two or three of the following options and start to steadily build your funds:

  • A Retirement Plan
  • S&P 500 Index Funds
  • Real Estate Investment Trusts (REITs)
  • Property
  • Build Savings

How Much Money is Needed?

There’s no minimum amount of money required so don’t be put off by the idea that you need thousands of dollars to start investing. You can start small by building your savings and using them to trade the stock market with the intent to grow your capital. Day trading is a good way to make big gains in liquid markets but there are day trading rules that you need to be aware of. You need to have a minimum of $25,000 in your account and you must make more than four-day trades per trading week. If you don’t have the minimum amount required, you can begin with as little as $500 to $1,000 and trade index funds.

Is it Wise to Get Professional Help?

Yes, absolutely! A financial planner can help you carve your way to a better future. The right individual can open your eyes when it comes to the importance of avoiding credit card debt, paying off your student loans, opening a checking account and investing the money you do have in the right places. It may seem counterintuitive having to pay fees to a financial planner when you’re trying to build wealth but it’s an investment that should repay its dividends over and over again.

What is Compounding and Why is it Important?

The biggest advantage of building wealth in your 20’s is that time is on your side. Accumulate a savings nest egg, put it in the right place and you’ll be able to earn extra income on your funds. This is compounding.

Do You Need Life Insurance at this Stage?

You might not see the logic in it now but taking out a life insurance policy is a means of investing in your financial future. Most companies will offer cheaper life insurance for younger individuals so it’s wise to secure those lower premiums while you can. Aside from replacing lost income, having adequate life insurance cover can help pay off any debts owed by your estate. Your biggest expense right now is most likely your student loan repayments and, in the unfortunate situation that something happened to you, you wouldn’t want to pass that burden onto those who cosigned on your loans. A life insurance policy could zero out the rest of the debt in that situation, which gives great peace of mind to those who have big repayments.