Steps to start investing for 20-year-olds

Starting investing at an early age turns with the passage of time a habit that makes it easier for the individual to determine his financial goals and prepare a plan to achieve it by choosing the appropriate investment tools.

Although individuals who are at the age of twenty may have a very limited income, mainly dependent on the expense or a simple income in order to do some seasonal or partial business, they must prepare a plan for investment as soon as possible regardless of the value of the money they own. Often this stage of life is full of many goals that need to be prepared for a savings and investment plan and earn income that helps in achieving it such as buying a house, buying a new car, or even starting to develop a retirement plan. Whereas, starting investing in such an age earns individuals the experiences and skills that help them to plan successfully for their future in the context of achieving short, medium and long term financial goals.

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Steps to start investing for 20-year-olds

1. Create a fund to deal with urgent matters

This fund refers to saving an appropriate amount that covers unexpected expenses that must be paid as soon as possible, such as necessary maintenance of some of the damage in the residence, or exposure to an accident that resulted in medical costs to cover injury treatment. It is also preferable to adjust this amount according to your financial changes such as increasing your salary or monthly obligations, and saving this amount in a way that helps you to obtain it as easily as depositing in a savings account.

2. Allocating a monthly sum for the investment

We have previously mentioned that the monthly income of twenty-year-olds may be relatively limited and relatively small compared to those who graduated and got jobs with a fixed monthly salary. But this should not be the reason for the delay in building your investments. Where it is advised to allocate part of the monthly income for investment, which is estimated at 5 percent of the monthly income of the individual. The earlier you start investing, the higher the expected returns and the more time you will have to make up for the loss if you suffer.

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3. Choose investment tools

The Saudi market is distinguished by the presence of a wide variety of investment tools that suit all individuals, whether it is an expert in the field of investment or a beginner. As these tools vary among themselves in terms of potential risks, expected profits and conditions that must be met by the investor. To reach the best investment tools, you must determine the degree of risk that you can take, in addition to the profits you expect. As it is a mistake to rely on a comparison of expected profits without taking into account the potential risks.

4. Avoid debt as much as possible

A person may view debt as an easy financial means that helps him to achieve his financial requirements and reach his goals without looking at how useful these debts are in reaching your goals. It is true that loans and debt are one of the legitimate financial tools for achieving long-term financial goals. But it is accompanied by a cost and financial obligations that must be fulfilled. Consequently, debt must be the last financial option you are considering, and this is in order to reach your necessary financial goals and not to cover the living expenses or your lifestyle.

5. Increase financial awareness

It may not be among your hobbies to follow financial news, market movements and other sources of information related to the economy and investment, but it is preferable that you develop your financial awareness as much as possible in order to be able to choose and manage your investment portfolio tools as you see fit according to the information you obtained, and thus protect yourself from Bodies that promote financial products and services that are not appropriate to your financial requirements and capabilities.

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The beginning of investment at an early age turns with the passage of time into a habit that makes it easier for the individual to determine his financial goals and prepare a plan to achieve it by choosing the investment tools that suit him in terms of the risks and expected profits. Where a person begins his investment journey by thinking about short, medium and long-term goals, then seeking to earn money that is commensurate with those needs and desired goals.