How to Invest Money in Your 20s
Time is on your side in the field of investing; the sooner you start, the better off you will be. Get into the habit of investing early in life and continue those smart money habits throughout your life so you can build a solid nest egg for the future. Investing when you are in your 20s is different from investing at other ages. Youth allows you to take more risk, and your status as a newly employed worker gives you access to a wealth of employer-based investment options.
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Instructions
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Build an emergency fund before you start investing for the long term. Split your direct-deposited pay between your regular checking account and a savings account that you use as an emergency fund. Continue moving money into the savings account until you have enough set aside to cover at least six to nine months of living expenses.
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Contact your employer’s human-resources department and inquire about the type of workplace retirement plan offered by your company. Invest as much as you can afford into that plan; the contributions lower your taxable income while helping you save for the future. Because you are starting when you are in your 20s, your retirement savings have many years to increase in value.
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Research the employee stock-purchase plan, if your company offers one. This is a good way to get started in the stock market -- you can invest through payroll deductions and avoid brokerage commissions. In many cases, stock-purchase plans allow you to buy stock at a discount from the market price.
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Redirect the money you used to build your emergency fund into a widely diversified mutual fund, once the emergency account has been fully funded. Index funds are particularly good choices for young investors; they are inexpensive to own and generate the same returns as the broader stock market.
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Open a Roth Individual Retirement Account, or Roth IRA, as soon as you are eligible to do so. Workers in their 20s can put aside money now into a Roth IRA and enjoy tax-free withdrawals when they retire. Under certain circumstances, Roth IRA investors can withdraw their money to purchase a first home or pay for education expenses.
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