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Not long ago investing in the stock market required a minimum and a stop at a hedge fund to purchase stocks. Today, it’s a lot different from the use of a cell phone.
Teaching the youth to start investing at an early age is so valuable, I’ve yet heard anyone losing all their hard earned money in the long run. Also, they get to learn discipline and get to understand the difference between saving and investing.
The year of 2021, has created a generation of young investors especially during the March 23rd market crash due to covid-19 and the capability of buying fractional shares.
Here are few ways how you can help them understand:
Table of Contents
SHARE YOUR EXPERIENCE
As a creature of habit we like to hear it first from people who once were at the position we are today to the position we see ourselves in the near future. People understand and resonate with you better when you tell your personal stories.
There are things you might not be revealing that you don’t deem important but for the audience perspective is very important.
HELP WITH THEIR NEXT MOVE
In the digital-age, many will hear about the stock market, stocks, and other financial jargons but do not know what else they should do afterwards.
For example, opening brokerage accounts like Robinhood, Fidelity and Vanguard sound complicated or they do have one but don’t know if they should invest in stocks and bonds, or they have some cash seating on savings and would like to invest some for retirement.
The fact that they have already done some homework shows some interest and should make it easier to help them move forward.
TEACH THEM INVESTING IS ALL ABOUT THE LONG TERM
Time is the most powerful gift young people have at their benefit. The sooner you start investing, the greater the rewards will be.
We know how valuable saving money is. But now, young people have an advantage that many of us did not have five years ago. The ability to invest in fractional shares with so little money. Some brokerage will allow you to purchase shares starting with $1.
The goal is to invest in record growth companies for their dividend or some low-cost Mutual fund and forget it. Rinse and repeat.
Historically speaking, The stock market always goes up in the long run. Take a look at the graph below (1984 to 2021) – The ride will not always be smooth; to tell the truth it will be pretty rough.
Buckle up and HODL (Hold On for Dear Life).
THE POWER OF COMPOUNDING INTEREST
This is the best part when investing for the long term, it’s to see how quick your money can grow. The earlier the better. Let me show you how compounding can make you rich – since the word “rich” is subjective let’s say living comfortably when you decide to retire.
Let me give you an example of two investors Justin (20) and Chloey (35). Both started with an initial $1000 and contributed $100 a month assuming 8% return yearly
Justin (20) will have $495,964 by the time he retires at age 65
Chloey (35) will have $146,078 by the time she retires at age 65
Notice the only difference between Justin and Chloey is when they started to invest.
Data has shown if Justin decides to stop contributing but stay invested 20 years later – now 40, his compound gains will allow him to have more money than Chloey.
SMALL STEPS LEAD TO BIG CHANGES
Believe it or not, you do not need a lot of money to start investing. Anyone telling you differently is misleading. As we’ve seen with the power of compound interest, you can beat the average salary by only investing a small amount monthly or as often as you can.
Start by changing your habits. There are many ways you can link new habits to things you are already doing. It may not feel like a major improvement in the short-term but in the long-term it will get you closer to your goal. Whenever you earn or receive money, invest a portion of it.
If possible, automate everything. Make sure you pay yourself first by having a certain amount go directly to saving and your brokerage account as soon as it hits your bank account.
FINAL WORDS
Do not wait until you’re no longer in the party spirit to start investing. The older you get, the more compound interest you’re leaving behind.
Nowadays, you don’t need to be financially savvy to know how to make our money work for us. You don’t even need a financial advisor if you take the time to educate yourself. Buy income while young and rejoice later.
**Valuable Resources I Use Daily:
Empower offers a free account to assist you in managing your net worth and investment portfolio. Your asset allocation and portfolio performance are so obvious and easy to grasp that I can't get enough of them. It's an excellent tool for anyone keeping track of their investments.
Robinhood is a platform that does not charge commissions. You can start investing with as little as $1 in stocks, ETFs, and REITs. It's simple to operate and navigate. Sign up now to receive a free stock.
Gio founded TheGrowthFocusedGuy in January 2020 because he was fed up with debt.
His mission is to document his journey to Financial Independence in order to motivate and inspire others to get out of debt and begin building generational wealth.
