The Importance of Investing

Updated: Apr 13



 

Heavy Hitters:

  • Saving is good, but investing is better. Investing can be simple if you let it be.

  • Investing can allow you to earn 750x or more than what you're earning in your traditional savings account. Free money, baby.

  • If you don't know when to start investing, start now. Time is on your side when it comes to investing.

  • You do not have to be rich to invest. I repeat: you do not have to be rich to invest. You can start with as little as $1 to dip your toe in.

 

Many of us are told from a young age that we should save. That saving is responsible. Saving is the key to security. Whatever you do, save. Yes, saving is "good", but you know what's better? What actually provides your future self security? Investing.


The crappy part is that we, and when I say we I mean women, are also told from a young age that the US financial system is complex, run by tall men in dark suits in a far off place, and it's something that we'll never fully participate in or understand...so why try? And the scary part of it is? None of this is true.


Investing is simply a type of saving. Instead of keeping savings in your bank account where it earns 0.01% interest, that money is placed in an investment vehicle (e.g. stock, bond, index fund, mutual fund) where it earns, on average, 7% - 8% interest annually. That's 750x the return you're likely getting in your Wells Fargo, Chase, Citi, you name it, bank account. And on top of that (oh yes, there's more), investing allows you to take advantage of compound interest, the idea that you earn returns not only on principal, but also on previously generated interest. More on that later, but think about this, if you had invested $10,000 in the stock market 10 years ago, it would be worth about $45,000 today without adding any additional money. If you're thinking you wish you had started investing then, it's time to start investing now or you'll be thinking that exact same thought in 10 years.


The best news? You can start investing with $1. This is not a sales pitch. You do not have to have a certain salary or job title or huge pool of money to invest. The key is to start young and start now.

 

Action Items

  • Take inventory of (or at least consider) what percent of your money goes to each of these categories each month: basics (groceries, clothing, rent, transportation), debt (student loans and credit cards are the biggies), entertainment (restaurants included!), and savings.

  • Do you have high interest debt? If so, focus on paying that down first. If you have a credit card with an 18% interest rate, think about that as a -18% return. Even if you earned 7% annually in the stock market, you're still netting -11%.

  • No high interest debt? Open a brokerage account (Vanguard, Fidelity, or Schwab are all great options) and set up a recurring monthly deposit. Start small and increase the number every few months. If unexpected money comes your way, your new account is the perfect place to put it.





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