Investing through the ages – in your twenties

Investment can help you make the most of your money. But making investment work for you takes more than luck, and a reserve of spare cash to get you started. It always takes careful planning.

That planning needs to depend on you, your personal circumstances and above all your age – because as the years go by our priorities and our financial goals change.

In this series of articles we are looking at what successful investment means for different age groups, how to make an investment plan, and how to put that plan into practice.

Your priorities in your twenties

In your twenties, you will probably be getting used to the idea of having money to spend as you start your working life. You will certainly find that there are plenty of ways to spend it. But although some of those ways seem too urgent to avoid, you do need to start thinking about ways to build up a reserve of cash.

You will probably want to own your own home, which means a large deposit will be necessary.

So the obvious thought is to start saving. Put money in a savings account, and when you come to draw it out, it should have grown, boosted by the interest paid by the account provider.

The problem is that these days, interest rates are so low that it may hardly have grown at all. In fact, inflation may mean that your saved cash has lost some of its real value.

This is why many people in their twenties are now looking at investing rather than at savings accounts to build up that all important cash lump sum

When interest rates are low, as they are now, investing – buying into funds, or directly investing in items such as commodities or shares – has the potential for much better returns than savings accounts which keep your money as cash, but the risk to your capital is higher and you could see a reduction in the value of your investment if investment markets fall or the price of commodities fall, you could lose all of your investment, if companies you were to invest in  fail .

Investing can be simple

You don’t have to be an investment expert to succeed at investing. Some knowledge is no bad thing but relying on your expert Financial Advisers to guide you thorough would be the best solution.

Understanding your financial circumstances and attitude to risk would be the first step.

You can simply find a strategy with the investment aims that match your own and leave it to the experts. You can even save on a regular monthly basis – you don’t need to find a big lump sum to get started.

Of course, you will want to be able to get at the cash lump sum you build up quickly, if you are using it as a house deposit – and to protect it from the taxman. A Stocks and Shares ISA which allows £20,000 a year in tax-efficientsavings could be the ideal solution. You can find funds which match your appetite for risk – you might feel comfortable with a fund that prioritises growth rather than security for your money.

What about a pension?

If you are in your twenties, you may think it is too early to start thinking about retirement, which could be forty or even nearly fifty years away. But the fact is that the sooner you start, the easier it is to save the money you want.

Joining a company pension scheme where your employer will pay in with you is a good place to start for your long term savings goals. If you are likely to change employers over the years, or want to work for yourself, a personal pension might be a good idea too.

Remember, thanks to the very attractive tax relief provided by the government, a pension can easily be the most rewarding investments you ever make.  The power of potential growth and skilled investment may make it more rewarding still.

What should you do?

We have prepared an infographic on the different ages of investment here and we are looking at each stage in more detail. But at Continuum, we can help you create a plan to make the most of your investments or pension, whatever your age.

If you would like to discuss becoming an investor in your 20s -or at any other time in life – please call us on 0345 643 0770, email us at [email protected] or click on the ‘Contact Us’ link below.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products or investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested, capital is at risk.

Equity investments do not afford the same capital security as deposit accounts.