Options for young adults to start investing

For young adults wishing to begin building their wealth, it can be difficult to know where to start. If they have no prior investing experience or have little or no money saved so far.

We are often asked what options are available, so here are our top 3 tips to help young adults make a start with investing.

1. Savings Accounts with Bonus Interest

Some banks have savings accounts that pay a bonus rate of interest each month if there is a regular contribution being made, such that the balance is higher at the end of each month than at the beginning.  There are banks currently paying more than 5% with these types of accounts.  Therefore, this is a good option because it is simple, has no fees, and encourages a regular monthly savings habit with the benefit of compound interest.

2. Invest in an Exchange-Traded Fund (ETF)

As an introduction to investing in the share market, you can start with a smaller amount, for example, $1,000, and invest it into an Exchange Traded Fund (ETF).  There are many options available, for example, an ETF representing the top 200 Australian public companies or top 5 banks.  You can then reinvest the dividends to keep the balance growing.  An ETF is a good option as it is like having a small basket of shares that you can top up and buy more once you save more money. With this option, it is important to know that the value of the investment can go up and down in the short term, but over the longer term (say 3+ years) you would expect the returns to be higher than cash.  There are brokerage costs associated with this option, however, these could be as low as $19.95 each time you buy a parcel of shares.

3. “Micro-investing”

Some platforms offer what is called “micro-investing”, where you download a mobile app and can start with as little as $100.  You can then add small amounts to it along the way either with a regular investment plan, or by setting a savings target linked to a spending or cash balance. This option seems to appeal to young adults as they are accustomed to using mobile devices for many things. In addition, the app is very visual and interactive so may encourage saving. This option does tend to have higher fees, costing $2 per month plus up to 0.50% of the amount invested per annum – so on $1,000 this would be $29 per year.

There are plenty of other options for young adults to start their investment journey. If you would like more information or guidance on how to get started, head to our website booking page or give us a call to book a meeting with one of our expert Financial Advisors.