Your early adulthood years aren’t just the start of your career and income. They’re also the beginning of your savings and investments. There are certain investment moves you need to make early in your career.
Table of Contents
1- Start an Emergency Fund
A general savings account is perhaps the most basic form of investing you can do. Still, it’s where you need to start.
As soon as you get your first job, one author at Money.com recommends saving at least 5 percent of your pay in an interest-bearing savings account. Continue building up your savings until you are at a savings rate of 10 percent of your income and have at least three months of living expenses saved up in your account.
Six months is even better to hit. Once you get this rainy day fund at a comfortable level, you can move on to other investment tactics.
2- Fire Up Your 401(k)
If your job offers you 401(k) benefits, then you need to take advantage of them as soon as your emergency fund is ready. Even better, if you can, start both at the same time.
Not sure how much to contribute to your 401(k)? CNBC recommends investing at least whatever your company is willing to match, if they offer that. For instance, if your employer matches up to 5 percent of your contributions, then invest at least 5 percent. Otherwise, you’re leaving money on the table.
CNBC also recommends bumping up your contributions anytime your actual pay goes up. That means every time you get a raise or a promotion.
3- Set Specific Goals
Starting savings habits early in your career is of paramount importance for many reasons. The longer you wait to do it, the harder it will get. Also, the sooner you start, the more money you can make off of more years of contributions and compounding interest.
Still, just saving isn’t enough. CNBC also recommends setting specific goals that you want to save for. First, you need to identify your goals, but you also need to figure out the potential price tags associated with them.
Specific goals you might want to save up for include but are not limited to:
- Retirement
- College
- Graduate school
- Home ownership
- Your kid’s college
4- Trust the Experts
While you are ultimately in charge of the final decisions about your investments, it’s easy to get lost in the overwhelming amount of advice available to you about where you park your money. Only you can decide your goals, your risk level, and how much you can save, but you can turn to experts to manage your money for you.
Even if you choose to handle a lot of this work yourself, letting industry gurus manage at least some of your money gives you access to knowledge, experience, and skills that you do not possibly have. Turn to professional financial advisors and wealth management when you can, so you can focus more on earning income and saving it.
Key Takeaways
Your first and early career jobs might not be glamorous work. They might not even pay that well. Still, as soon as you can, focus on:
- Saving up a rainy day fund
- Starting up a 401(k)
- Setting goals
- Finding money management experts
The sooner you do these things, the sooner you will enjoy financial security and prosperity.
