Four Ways to Get Your Feet Wet With Investing

All of us would like to have a feeling of security and control over our finances. So, what’s keeping us from getting there? The idea that you have to make a lot to save a lot is a myth. Whether you make $15,000 or $1.5 million, you can save and invest for your future. Just as with any great journey, sometimes the only thing holding you back is getting started. And my guess is you're already investing more than you think!

Four great ways to get your feet wet when it comes to making investments are through retirement plans, college funds, housing, and emergency funds. Some reasons these make great starter investments are:

  • They're easy to understand, which makes it easier to stay motivated.
  • They are often simple to set up, which reduces the barriers to getting started.
  • They often address another need in your life as well; score!

So let's look at these four options:

Retirement Plans

Retirement plans are one of the easiest and most effective ways to get started investing. You've heard of -- or may even have -- a 401(k) or 403(b), which are retirement plans offered by an employer. The best part of these plans? Employers will often match part of your contribution -- free money! Every company's rules are different, so take the time to ask questions and learn more about your office-based retirement plan options before you invest.

One of the beauties of 401(k) plans is that you don’t miss the money. Since the funds are taken out from your paycheck before it hits your hand, you don’t see it, so many don’t notice it’s gone.

Even if you don't get the matching benefits of a 401(k), be sure to find out which retirement accounts make the most sense for you. There are other types of plans, like IRAs, which aren't even associated with your employer. The tax benefits of these accounts usually mean the government is chipping some money in, too. They're a very safe way to make your money work for you.

College Funds

Some people will make the point that a retirement account is more important than a college fund, since kids can borrow for college, but you can't borrow for your retirement. There may be some merit to that thinking, but I think many of us are more concerned about making sure our children get a good education than whether we can retire in style. If my husband and I become incapacitated, I would like to know my kids will be secure. (Of course, saving for retirement and contributing to your kids' schooling aren't mutually exclusive.)

So, with that in mind, putting savings aside into college funds is one of the easiest ways to save, because you’re only going to get more and more motivated to do so. College isn’t just tuition -- it’s residence, food, books, and travel costs. Perhaps you’ll luck into the situation where your child will get a full-ride scholarship or the government will magically offer them nothing but grants each year, but that's not going to be the case for most of us.

Creating a college fund is a very smart investment for you to make at any age. Whether you have children now, or are planning to have them in the future. What’s the worst that could happen? Your child chooses not to go to college, and you have $30,000 saved up for your own retirement? That doesn't sound too bad to me.

While you're considering this move, check out the Government-based 529 Plans that can add a tax advantage to your saving.

Housing

First off, it is a myth that if you rent, you are throwing away money. Your landlord may get equity, but he or she also gets property taxes, insurance payments, maintenance costs and many other lesser appreciated joys of property ownership. There are reasons for both renting and home ownership.

That said, housing can make a very sound investment for many of us. Buying a house puts you in the position to be protected from inflation and to take advantage of the limited amount of real estate in the world. They aren't making any more land, so owning some of your own has some inherent advantages. There are many pros and cons to owning a house, but because it solves a fundamental need, it can make a great entry-level investment. Additionally, the pride and security of owning your own home, coupled with the savings from setting aside a house fund, can provide great motivation to keep you saving.

Stay tuned to MomVesting as we discuss later the pros and cons of home ownership in more detail.

Emergency Funds

Emergency funds are, arguably, the best way to start saving. An emergency fund is a certain amount of money -- often in an easily accessible checking or savings account -- that can be used during a time when other financial resources are not available. For example, emergency funds can be very useful if you are hurt and can't work, if you lose your job, or if something happens to your home or car that's not covered by insurance.

To create an emergency fund, figure out how much you need to maintain your current lifestyle for three-six months -- this includes bills, insurance payments, food, clothing, transportation, housing costs, medical expenses, etc. Set up a separate savings account and begin saving toward that three-six month amount.

Now, with that emergency fund, you might want to set aside the deductible amounts for any insurance you have. Having a high deductible will help you save money on insurance premiums, but that extra money is going be meaningless if you don’t actually save it. While the necessity to have access to your emergency fund can reduce the number of options, there are still ways to make this money work for you while it's also providing peace of mind.

There’s No Time Like the Present

Regardless of what you decide to save, or how you decide to save, the main point is to just start. All of these investment options represent a great opportunity to invest in your security. Once you've got this foundation in place, you can be more confident about making future investments to keep putting your money to work for you.

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This post is part of the Wealth Builder Carnival. Head over there for more great posts about building wealth.

Anonymous's picture

Shaun wrote:

Fri, 11/12/2010 - 05:32 Comment #: 1

A great way for people to kick things off and start thinking about their futures.It doesn't have to be difficult and starting now is way better than starting later!

Anonymous's picture

Friday Links wrote:

Fri, 11/12/2010 - 08:43 Comment #: 2

[...] MomVesting – 4 Ways to Get Your Feet Wet With Investing [...]

Jessica Schmeidler's picture

Jessica Schmeidler wrote:

Fri, 11/12/2010 - 18:47 Comment #: 3

Percisely; investing can be as easy or as difficult as we make it. So, why put off until tomorrow what you can start today?

Anonymous's picture

Carnival of Wealth #13 – Nov 21 2010 Edition — Per wrote:

Mon, 11/22/2010 - 09:10 Comment #: 4

[...] income investing using preferred shares and dividend stocks.”Rachel presents Four Ways to Get Your Feet Wet With Investing posted at MomVesting, saying, “A look at how to get started investing without getting too far [...]

Anonymous's picture

Women and Finances: Getting Started Budgeting and Investing wrote:

Wed, 01/18/2012 - 21:15 Comment #: 5

[...] are four types of investments to consider when getting [...]

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