Millennial Money Tips - #1. Don't Wait To Invest
Hello to all you lovely financial divas.
I noticed that there are tons of money tips out there but that very few are specific to Millennials. I'm sure you've all seen tips about carrying your money around in a binder full of labelled envelopes (known as the envelope system), or using special clips to categorize the money in your wallet (known as the clip system) - which are all great, but if you are like me then perhaps you find yourself asking "who wants to carry that much cash around with them in their wallet?" If you are a Millennial, or even Gen Z, then most likely you rarely carry actual money in your wallet - Apple and Tap pay are just so much more convenient.
It appears that a lot of the money tips out there do not really apply to this generation. In response I've decided to create a series of Money Tips with your generation in mind.
So without further adieu...
TIP #1 - Don't Wait To Invest. Investing is anything you do to make your money earn more money. The beauty about investing is that it puts your money to work for you, instead of you working to make money - your investments will continue to earn you money even while you are sleeping.
The two major things that will affect how much money you'll have in the future are:
- TIME (How long you have for your money to grow).
- INTEREST (How much return your investment will earn).
Chances are you have a long time until retirement - which means that you have two advantages when it comes to investing, which are TIME and COMPOUNDED INTEREST.
Basically the longer you have your money invested, the more interest it makes - and for each year that passes that money continues to make more interest on top of the interest you earned from the previous years. You can think of your investment as a snowball rolling down a hill - the longer it keeps rolling (TIME) and the more snow it collects (INTEREST) the bigger it gets and the faster it grows. When you invest and keep making weekly, monthly, or yearly contributions to it, your investment will grow bigger and bigger with time, just like the snowball.
The good news is that you don't need to be a financial genius to start investing. There are many easy ways to to start investing today. Based on my personal experiences I recommend the following places to start:
High Interest Savings or Tax Free Savings Accounts (TFSA) - Risk Rating: no risk. This type of investment is ideal for individuals who want the option of accessing their money if needed, and who don't want to take on any risk (the chance of losing their investment). The key here is to look for accounts that offer at least 1.5% interest such as those offered by Oaken Financial or Tangerine. Most banks offer extremely low interest rates that don't even keep up with the rate of inflation (the increased cost of living), so it's extremely important to do your homework and get the highest possible rate - otherwise you could lose thousands in potential earnings in the long run.
GIC Investments - Risk Rating: no risk. Another good option for anyone who does not want to have any risk, but who are comfortable with leaving their money in and not touching it for the next 1 to 5 years. Many banks offer GICs but the key here is to look for one that offers not only the highest interest but also yearly compounded interest (when the interest payments are calculated and paid-out yearly, not at the end of the term). This will make a huge difference in how much money you will make on your investment.
Direct Investing in Low Cost Index Funds - Risk Rating: Medium risk depending on the fund. This option is for you ladies who want to see your investments grow much faster, and who don't mind taking on a little more risk, but still want to be able to sleep at night & not have to constantly watch the stock market. The good news is that you don't need to see a financial advisor or open a high-fee Mutual Fund to get started. All you need to do is open a Direct Investing Account at your bank, or an account with a low-fee investment company such as Wealth Simple. My personal favourite ETFs are from Vanguard (Vanguard Canada) and this is because their funds usually have the lowest MERs on the market (MERs are operational fees you pay to the fund manager). The great thing about an ETF or Index Fund is that your investments are diversified (meaning your money is spread out among many top performing companies such as Amazon & Google). Another benefit to owning an ETF or Index Fund is that you also begin to earn money from quarterly or yearly dividend payments for as long as you are invested in the fund.
You may find that having a combination of investment types may be the best option for you.
The main insight I hope you take away from today's post is that the longer you wait to start investing the less time your snowball of money has to grow - And remember, your two main advantages are TIME and COMPOUNDED INTEREST. There is no better time than now to start looking into what investing opportunities are available to you. You can do this ladies!
Keep a look out for future posts on more tips and tutorials specific to Investing.
May your journey be prosperous. Tara