By David Pekema
It’s hard enough to keep up with rent, utilities, food, and debt payments on a first year’s salary, which is why most recent graduates keep their money in the same li’l junior’s checking account that our grandmothers set up for us when we were ten. But keeping your money in a zero- or very-low-interest rate checking account
is akin to going to the gym, stretching, and then walking on a treadmill for an hour. Sure, it’s safe and flexible, but you’re not a crotchety octogenarian yet. You want rock hard abs. You want tone. You want more.
The two biggest misconceptions about investing are that you need a ton of cash to start and that it necessarily locks your money away until you’re fifty. Fact is, if you start off with a thousand bucks and add a measly fifty more each month, in five years a conservative stock portfolio would leave you with about $4500 dollars. The key is to just be a little disciplined. Think about it this way: throwing home-brewed coffee into a to-go cup everyday rather than dropping five dollars at Starbucks would save you enough to start a pretty significant investment portfolio that, in a couple years, could add up to a week in Thailand or a Cartier watch. But how to wade through all of the options? Investing is a whole lot like picking up women, from the risks (bankruptcy/a dose of the clap) and the rewards (cash/knockin' boots). Here's how to make the right choice for you.
Note: In all cases, look for the best rate possible and avoid high fees. A little effort can mean a big difference in your long term savings. Talk with friends about their investment choices and performance. Comparison shop the banks in your area. Scour the Internet for the best possible CD. And, most importantly, whether buying a mutual fund or transferring money to and from accounts, avoid unnecessary fees...
By David Pekema
There’s a lot more to investing than tying up major funds in order to one day purchase a home or retire in Aruba. It may not seem like it, but you make investment decisions every day. Buying new shoes—investment decision. Leaving your meager savings in a checking account rather than a high yield savings account
—investment decision. Spending $200 on Cinco de Mayo margaritas—investment decision (an enjoyable one, I might add). Truth be told, everything you do with your money is an investment decision—some just have the potential to bring you much larger returns.
Given the profusion of low-cost options available over the Internet, there has never been a better time to be a young investor. New, high-yield online savings accounts offer high returns (up to ten times higher than traditional savings accounts), zero risk, and complete liquidity. Exchange-traded funds (ETFs) give you the diversity of mutual funds, with low minimum investments. Many companies will make matching 401(k) contributions. Heck, buying stuff on eBay then turning around and re-selling it is even a kind of investment. Mutual funds, IRAs, and blue-chip stocks will definitely have a large place in your portfolio down the road, but for the time being, any prudent financial decision you make will have lasting benefits.
“Why should I invest?”
“More young Americans believe Elvis is alive than believe that they’ll ever see a Social Security check.” – John McCain
It seems like a valid question. What’s the fun in stashing away your hard-earned money in a robotic sounding 401(k) when you could be downing mojitos, strutting in Diesel jeans, or leasing a brand new Lexus instead? We’ve lived like serfs for four years in order to land jobs. Once the paychecks start rolling in, it’s our right to spend the money as we please.
Then again, “Why should I brush my teeth?” “Why should I wear pants to work?” and “Why should I put on this condom?” could all also be considered valid questions. The answer to the investment query—as with the other three—is not complicated. Although it may not be fun now, investing even small amounts while you’re young affords you the opportunity to one day own a home, live debt free, and guarantee that you won’t be greeting customers at Wal-Mart well into your seventies.
Not that all investing is about retirement. These days, leaving all your cash in a simple checking or savings account doesn’t make any sense. Online savings and trading accounts will earn you two to five times as much interest. It’s all about making your money work for you—the only trick is to choose the right bank account for your every day funds, as well. E-Trade’s on-line savings account consistently boasts some of the best interest rates available, and Scottrade’s $7 commissions on stock trades make investing affordable for everyone. There are a myriad of investment options out there (fear not, we’ve got you covered), so whether saving up for a ...