Sure, investing can be intimidating. And if you’re averse to what can appear to be an endless stream of formulas, ratios, and financial jargon, now is the time to get over it. Women, especially, must invest early because they tend to live longer and therefore require more money to maintain their standard of living after retirement. Some 80% of women will die single whereas approximately 80% of men will die married, according to the Women’s Institute for a Secure Retirement.
There are countless resources available to help you learn the fundamentals of investing. Over the next five days, Black Enterprise will share the top five investing rules for women. Today’s tip: Start Early.
Megan R. Smith, 26
Megan R. Smith didn’t waste time when it came to planning her financial future. With her father’s help, Smith, at age 10, began socking away half of her monthly $25 allowance in a savings account. When she was 15, her father helped her purchase her first certificate of deposit and a few bonds. “After purchasing my first CD, I became really excited about money management and I went to my dad and asked him what else I could do. That’s when we started talking about mutual funds, investment accounts, and money market accounts.” At the age of 22, when she started working at Starbucks as a marketing assistant in 2005, she received stock options at a considerable employee discount. Smith eagerly took advantage of the opportunity, purchasing more than 200 shares of Starbucks stock. Now 26, she has more than $29,000 in investment savings. “Most people my age don’t understand how to invest. But you should start learning about investing money and building wealth now,” she says. Smith left Starbucks in 2006 and has since founded a public relations firm, Brownstone PR, in Philadelphia.
Many people in their 20s put off investing, insisting that they’ll start when they begin earning more money. Resist that line of thinking. Starting early gives your money time to grow because of compound interest, which is interest earned not only on the original principal but also on previously earned interest. “A lot of women don’t put money away in their retirement accounts when they first start working—that’s a huge mistake,” says Cheryl Broussard, registered financial adviser and author of the e-book Starting Over: Fast Cash and Getting Back on Financial Track (Cheryl Broussard; $19.99). “When you first begin working, contribute to your retirement plan as soon as you’re eligible, even if it’s just $50 a month. A small amount can make a huge difference over time.”
Don’t put off investing until a life change occurs. Regardless of your marital status, now is always a good time to start investing. “For many people, it’s life changes such as getting married, having children, etc., that cause them to get serious about their finances,” says Manisha Thakor, a chartered financial analyst and co-author of Get Financially Naked: How to Talk Money with Your Honey (Adams Media; $12.95). “For single people who may not be experiencing those kinds of life-altering events, they need to create their own catalysts to take charge of their money.”
–Contribute to your company’s retirement plan as soon as you’re eligible. Each year that you delay means there will be less money for your future. Talk to your human resources representative and ask how you can get started.
–Start small. If you’ve just started working and you don’t earn much, invest what you can. Every little bit counts.
–Remain committed to your investment plan. The stock market goes up and down. Don’t become disheartened by losses and sell your investments. Keep contributing to your accounts and stay determined to ride out the storms.
This article originally appeared in the March 2010 issue of Black Enterprise magazine.