INVESTINGLIFESTYLE & TRAVEL

What Previous Generations Wished They Had Learned About Investing

One of the best parts about being around experienced adults is hearing the life lessons they have learned. Often, these lessons have been learned the hard way — or far too late. One of the most common lessons many older adults discuss is wishing that they had started investing earlier. As a financial educator, a frequent comment older adults share with me is they wish they would have learned about investing when they were in school. I always tell them I wish I could’ve learned about investing in school too!

You are fortunate to be living in the information age, where you can find answers to almost anything in a matter of seconds. You also have access to reputable sources to help you interpret what you have learned and use that information to reach your goals. Use this article as a starting point when it comes to investing so you can learn what others wish they had known earlier.

Invest Early

If you are 18 or older, you can open an investment account such as a Traditional or Roth IRA to begin your investing journey. For individuals who are currently working but haven’t reached 18 and would like to get started, many financial institutions will allow an adult to open a joint account with you until you do. However, it’s important to find an adult that is trustworthy and responsible to do so.

Start Small

If a traditional or Roth individual retirement account (IRA) still feels like a big commitment, then consider other investing options that let you learn and see financial growth, like a certificate of deposit. A certificate will allow you to put money aside in an account for a specific period or term. You will earn dividends (like interest on a savings account) on that deposit until it matures or reaches the end of the term. Using a financial product like this will allow you to see compounding in action with very little risk. You might be worried you don’t have a lot of money to invest, which is OK — and that leads me to my next point.

Nothing Is Too Small 

Investing early — no matter how big or small the amount — is about creating the habit. Another important factor to keep in mind is that investing is about building wealth slowly over time. The longer you invest, the more time it has to compound. Starting with $50 a paycheck per month is a great way to begin saving and taking advantage of compound interest! Read the article Investing $50 to learn more about what that can look like.

No Early Withdraws

One of the most important rules to remember when it comes to investing is don’t withdraw early. Many investment options come with specific terms and guidelines, which could mean paying a penalty if you withdraw funds earlier than allowed. If an early withdrawal is needed, do your best to calculate the penalties or tax implications beforehand. You can find numerous financial calculators online to help with this.

Special Circumstances to Withdraw Early

There can be special reasons to withdraw from investments early that will help you avoid or lessen the penalties associated with it, such as rolling over a retirement account or a hardship withdraw for extreme life events such as death or disability. If there are special circumstances to withdraw early, remember that you will ultimately be sacrificing earned dividends and compound interest in future income.

No matter how you choose to invest, remember that investing is part of financial wellness, and financial wellness is a lifelong journey. You will have highs and lows but when you begin early, remain consistent and continue learning, you will likely benefit.

Sources:

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-hardship-distributions

https://www.nerdwallet.com/article/banking/cd-early-withdrawal-penalty-by-bank?msockid=3d4ba4c057a4628830bfb2ea56da631a