We’re all looking to keep our futures secure, especially when it comes to personal finances. A part of this is getting involved in the investment scene as soon as we can. Yes – some people even get their first stocks or bonds when they’re still in high school!
If you’re like me, your parents or grandparents may have purchased savings bonds for you when you were younger. The gift certainly feels underwhelming at first. I mean – oh, wow, so cool…a piece of paper. I’m what, four years old?
Looking back, though, I’m thankful. I understand now just how important getting a head start on building our savings is. My goal today is to help impart that lesson onto you as well!
What is Investing?
This is a popular buzzword for many people who take great pride in their financial situations. What does it mean, though? Well, investing is when you purchase an item or asset of some sort that you expect to grow in value. Ideally, you can earn passive money from them as well.
Some of the most common types of things you can try to get involved with are stocks, bonds, mutual funds, commodities, or real estate. Obviously, each of these fields has its own risks and benefits. You should try to educate yourself on all of them.
There are also forms of retirement accounts that are considered investments. These are IRAs or 401(k)s. Both are forms of savings accounts that offer special tax benefits, so if that intrigues you, I definitely recommend looking into them. There are a variety of possibilities for the type of account you want to open and the different tax strategies you could employ for them.
As I mentioned above, the whole point of starting to do this is to purchase things that you think will gain value over time. This is usually called appreciating value. If something decreases in value, it depreciates. An example of something appreciating is if you buy stock for a company at one price, and then the price gets higher as they release a product and get good sales numbers.
When you sell your asset at that larger price, it is known as a capital gain. This is the end goal of most investors, since we want to earn money. Some people have gotten very good at reading the trends of the stock market and know when to buy or sell for the best profits.
As far as generating income goes, this only works for specific assets. These are bonds or dividend-paying stocks. Both types make payments to the holders on a somewhat regular basis.
How You Can Start
While a piggy bank might be considered a form of investment, it’s not really what I’m getting at today. Still, it is a good way to teach our kids about saving money! The joy they feel when counting all the money they’ve saved is akin to seeing how much interest we build on our assets in adulthood.
If you’re making the decision to begin, you might consider consulting with a professional advisor or company. Something like Goldco can help you navigate this world that you’re entering if you are unfamiliar. Everything has a learning curve, so there is no shame in getting assistance.
Once you are ready to dip your toes in, you could start with a small online brokerage account. This allows you to select stocks that you want. If you have one of these, you can also get access to something known as exchange-traded funds. Many know them as ETFs.
You should also make a 401(k) and an IRA account as soon as possible. The former will rely on your employer – not every company offers them. Hopefully, you learned about this in your orientation and training. If not, inquire with your employer and discuss potential options.
Whether you can open a 401(k) or not, you should also have an IRA, or an individual retirement arrangement. This is a critical step to ensure the security of your post-retirement life. The tax benefits you can enjoy from contributing is just one facet of this.
An interesting form of IRA is the gold or precious metal IRA. There are many brokers out there like the one I mentioned briefly above. While the process might seem complicated, generally your broker or custodian can help walk you through it and explain it along the way.
You may be wondering why you would opt for precious metals in the first place. They fall into the commodities branch of alternative assets, and they have historically retained their value for a long time. Gold and silver are the usual ones we think of, especially when it comes to the bars (known as bullion). However, there is also platinum and palladium.
If you enjoy collecting coins, you may have some that are eligible to be placed in one of these accounts. An example is the Canadian Maple Leaf, or the American Gold Eagle. Just remember that only specific ones are allowed by the IRS to be deposited into one of these accounts.
Notably, you cannot place other collectibles or valuables made of precious metals into one. That means any jewelry does not qualify. The bars still do, of course.
One of the biggest concerns I have about finances is the rates of inflation. While it has been steadily rising for decades, the sharp incline over the past two years is concerning to say the least. This means that stockpiling resources that are not paper currency can be quite valuable.
Some people think that cryptocurrencies are the future. However, I think sticking with the tried and true is probably a safer idea. Gold and silver prices are steady. There is little chance that they will suddenly drop and it will be a permanent change.
Because they are a resource that we have used for centuries, we know it won’t stop any time soon. The same can’t be said for something like crypto. Consider a precious metals IRA, and you won’t regret it!