Becoming a young adult means being introduced to the world of finance. Many disregard the value of saving and investing early and push it off as something to worry about when older, however, the reality of the matter is that the best time to start is as soon as possible. 

To better understand this narrative, it is important to understand the literal meanings of both terms. Spending is the act of paying out cash without expecting that cash to return, while investing is the act of paying out cash with the anticipation that money will come back with a positive profit. While it may be convenient to simply pay as money comes in, many opportunities are being missed by choosing not to invest right now. 

There is no specific amount of cash needed to start investing. Whether it be $10 or $1,000, people can start earning long-term right away. For instance, opening a savings account is a basic and minimal-cost way to yield a return long-term. As a first step, begin by researching which bank to open a savings account in, as each has its appeals. Along with earning from the rate of an annual percentage yield, interest can be compounded from an initial deposit daily, monthly or annually. These rates depend on which bank a savings account is opened in, but looking in-depth is a great way to earn money.

Another way to invest is through stocks. Many different applications have made trading easy and more appealing to young adults. Financial education content is easily accessible these days to simplify the trading process. Applications like “Robinhood” and “TD Ameritrade” have an easy-to-understand user interface and provide resources that can help assist a beginner. This is substantial because the reason many people do not start investing is that it seems too complex at first glance. 

Another benefit that comes along with investing is the contribution to retirement. It is easy for young Americans to disregard saving for retirement, as many will argue the reality of it seems so distant into the future. Though it may be far away, ideally, starting sooner towards saving will result in a bigger payoff toward the end. The difference between starting to save during someone’s 20s compared to 40s can be as different as a 1 million dollar return by retirement age.

Being able to save efficiently is a matter of creating an appropriate budget and self-discipline. Many people are tempted to spend what they have now, but creating a budget means spending more wisely. The 50/30/20 rule is a financial rule-of-thumb that is defined by 50% of monthly earnings being spent toward needs, 30% goes towards wants and 20% is invested. While the needs-to-wants ratio is more flexible to adjust, the biggest takeaway is that 20% should be invested. Simply, someone can not invest if they do not have the money saved, so managing a budget gives the best opportunity to save. 

According to Bankrate, only 18 percent of 18 to 25-year-olds are “actively investing.” Unfortunately, this means that a large percentage of people within that age group are missing out on opportunities that could be taken advantage of to benefit themselves in the future. The reasoning that “it is too difficult to understand right now,” or “this is something to do later” just wastes time in a case where time equals money.