It is important to invest your money, whether you are building an emergency fund or working towards a long-term goal. By those things, you can use your money to go holiday or create your own business. But the contrast between saving money and creating wealth is different.
Every year, if you invest your money 10% of your salary, the money will add up over time and you’ll end up with investments you can tap into when you need them. However, if you spend the money that you are saving, your savings will generate more wealth by collecting interest or dividends.
This is the place where you start investing your money.
1. Set Saving Goals
If you’re concentrating on building wealth, having a specific target in mind helps. You can decide what you want. For instance, financial freedom, secure retirement savings, the opportunity to early withdraw money to start a company every month, extra income, and a net financial stability.
2. Start with a High-Interest Savings Account
You’ll need to save for your initial investment before you can start investing. Many institutions have an initial minimum investment, generally between $1,000 and $10,000, but a rising threshold is $3,000.
You can also take advantage of compound interest by using a high-interest savings plan to save up the $3000. That helps your money to grow faster as you save but before you start investing. High interest savings accounts currently offer interest rates ranging from 1% to 2%, compared to standard savings accounts that typically pay less than 1% interest.
3. Learn about Investing
If you’re new to investing, selecting a few good mutual or index funds with a established track record is the cheapest and easiest way to invest. And also, sticking with them even when the market goes up and down. This helps you to rebound from market low points and protects you against volatility in the market. Things you need to consider are diversification, tax advantages, and access.
4. Make Steady Progress
Making daily investments, though smaller, often spreads the risk by making sure you never make any of the stock or fund purchases at the highest point on the market. In other words, it is a dollar-cost averaging.
5. Work with a Financial Planner
A financial planner can help you understand the various products on offer and the risks associated with each. Generally speaking the higher the return means there is more risk involved. You can select goods with a higher rate of return when you’re in your twenties, because you have the option to wait for the economy to recover.
