How To Start Investing in Your 20s

by Editorial Team

Your 20s is the most delicate time of your life. At this time, you would have finished college, started a career and on your way to becoming an adult dealing with the responsibilities of life. This is the period of your life you will often have a bit of spare cash lying about that you didn’t have any pressing need to spend on, but this is actually when you should start investing that money.

I was lucky to understand this as a young man. I started investing early in life and one of the reasons that always motivated me was that I didn’t want to work 20, 30 years of my life with nothing to show for it. A rat race with no end. So I took the pains of learning, earning, saving, investing and doing it all over again year after year. I can say I’ve put myself up for success and in this article, I am going to show you how you can start investing in your 20s and watch it pay off in a big way in years to come.

  1. Create a Vision and Set Investment Goals

    The first step in your investment exercise is to get clear on your vision and set goals based on it. Goals are the most important aspect of any investment. When you have determined your goals to be free of debts, travel the world, have emergency funds, start a family, retire early and so on, you can work towards them by investing. It’s all about taking a look at all the experience you want to have throughout your life and deciding their order of priority, then crafting an investment plan that can make them possible.

    Your savings and investments towards short-term goals will definitely not be the same for the long-term goals. Your 20s may just be the start of a saving habit but coming to a specific savings rate that you increase yearly will greatly impact your whole life.

  2. Look at the Bigger Picture and Realize Money is Just a Tool

    There’s a temptation to see money as the solution to all your problems when you are in your 20s, but I’ll be straight with you; money is nothing but a tool! Think of money as a tool you use to create a life and lifestyle you want through choices that include spending, saving and investing.

    Engaging in diligent saving and investing early on is key to giving yourself the life you have always desired. While you may be trading your time and effort for money, this tool will be used later on to give you the time to enjoy the things that matter most to you in life.

  3. Start Investing Early to Take Advantage of Compounding Interest

    It may seem like in your 20’s you still have all the time to get your financial life together. So it wouldn’t hurt to put off investing for a while. Unfortunately, waiting can be detrimental. Consider this scenario:

    Let’s say you invest $300 per month from the age of 20 and continue doing this till age 60. If you manage an 8-percent return in that time, you would have nothing less than $1 million in that account alone. If you had waited to 30 to start saving, you would have ended up with only $440,445 in that account by 60. See, those first tens you missed out on cost you $550,000 in returns. That’s the magic of compound interest. If you harness the power of compound interest, you are well on your way to enjoying a financially free future.

  4. Invest in Yourself, Learn, Grow, Travel

    Investing in yourself is the best financial advice anyone can give you. You need to spend more on your personal, professional and financial growth in the ways you seem fit. The reason is that when you invest in work ethic, skillset or knowledge, you are making an investment that can not be taken from you and can guarantee your future.

    Read as many books as you and attend as many conferences as possible to support your growth. Some great books to get started include J. L Collins’ The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life, The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change by Stephen R. Covey and The Total Money Makeover: A Proven Plan for Financial Fitness by Dave Ramsey. These are all available on Amazon.

    It’s important to get as much education as possible but after learning, it is crucial to apply the things you have learned to your daily life.

    Another way to invest in yourself and your future is to take online courses. There are a plethora of online courses on virtually any topic that can sharpen your knowledge bank and boost your skill set.

    Whether you’re looking to drive a certain skill needed for your career path or to start a new hobby and passion, you can get access to cost-effective options at the click of a button.

  5. Find a Broker or Robo-Advisor

    If sitting down with a financial planner is not your thing, then a Robo-advisor may be a great option. Robo-advisors may not offer the personalized service financial planners offer but they are extremely helpful in guiding your investing decisions.

    All you need do is provide some information and Robo-advisors invest your money according to the number of risks you can take. They don’t charge high and don’t mandate you start with a lot of money. Robo-advisors are great for beginning investors which most investors in their 20s are, but as your finances get more complicated, you may have to seek more professional and personalized assistance.

    As a Muslim, I sought advice from brokers and was recommended a form of investing that is safe and keeps me adherent to Islamic laws. It is called Halal investing, a form of investing governed by shariah law that forbids interests. Halal investing enables me to invest in a socially responsible way without violating the rules and regulations regarding investing as outlined in the Quran and Hadith. 

  6. Seek Opportunity and Take Risks

    As an early investor, I was always on the lookout for new investment opportunities and Bitcoin appealed to me at a time many were still skeptical and wondered if it would do well. I think taking bold decisions like this despite the risks involved has served me well and taught me big lessons about risk-investing.

    Today, many investors are so afraid of risks even when this is what might help them over many years to come. If you want to hit a million dollars, then you would require a substantial investment in say stocks, even though this is riskier than putting your money in a savings account. Stocks are a more rewarding investment over a long period.

    While you will discover many ways to start investing in your twenties, it is important that you don’t procrastinate but get started early and invest wisely. The 20’s decade could decide the rest of your life, so get to investing and let this habit help you achieve your financial goals for years to come.

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