If you have low-interest debt, like student loans, you may come out ahead over the long term by investing money instead of putting extra toward paying off that debt.Ĭredit card debit, though, may carry rates that are almost two times the average market returns.

Private loan rates are generally a little higher, though with recent interest rate cuts, you may be able to lock in historically low rates. In general, federal student loans for undergraduate study carry interest rates of 4.53 percent. Over the long term (think decades), the S&P 500, a major stock market benchmark, has seen average annual returns of about 10 percent, though returns fluctuate year by year. You may also want to consider if the returns you’d make by investing your money could exceed the interest you’re paying on your debt. For others, being debt-free as quickly as possible may be their highest priority, so they prefer to put any extra funds toward paying down their debt. That way, when the debt is paid off, they aren’t starting at zero. Some people prefer to start investing so they can see some of their money grow even as they’re paying down debt. Try our compound interest calculator to see for yourself!īut whether you want to invest in a regular investment account, too, before you pay off your debt is up to you. And investing as early as possible for retirement-even if you’re just contributing a small amount each month-is smart as it gives your money more time to compound (when your earnings make earnings and so on). Generally speaking, experts recommend that if your company offers a 401(k) match, you should always try to contribute enough so that you can get it.

Once you’ve built up a cash cushion, you may be ready to start investing. A transfer of just $20 a week could build a $1,000 fund in less than a year. Work up to a $1,000 emergency fund by setting up automatic transfers into a separate savings account. Aim to work up to that so you don’t have to cover large sums with a credit card. About 40 percent of Americans couldn’t cover a $1,000 unexpected expense. But you don’t have to get to that number overnight. Most financial experts recommend you have enough to cover three to six months of your living expenses in your emergency fund. If you haven’t already, take steps to build up an emergency fund so you have money on hand when the unexpected happens-because it inevitably will. And you can leave the money you invested alone so it can benefit from market growth over time. When you have money set aside in a checking or high-yield savings account, you have pretty ready access to it. That’s why having an emergency savings fund is so important. This is what experts call “locking in your losses.” Instead, you may have to sell shares at a lower price than you paid to purchase them. But if you could need your money at a time when the market’s down, you may not be able to wait for a recovery. That’s because while the overall trajectory of the stock market has been up, it hasn’t grown in a straight line.Įvery market downturn in history has ended in an upturn. Investing involves risk, and risk means that you may not always have the money you want there if you need it in a pinch. Should I invest if I don’t have an emergency fund?īefore you start investing, it’s important to have at least a little set aside to cover yourself in an emergency. (Although really, they probably can apply to anyone who’s new to investing.) It doesn’t take big bucks to start investing, though, and even investing small amounts can pay off over time.īelow, we answer common millennial questions about investing. Most millennials know they probably should be investing, but they don’t feel they have enough money. That isn’t necessarily from a lack of knowhow. Over 40 percent of millennials aren’t investing yet, according to a recent GoBankingRates survey. In fact, Pew Research considers anyone born between 19 a millennial, meaning even the youngest of millennials is about ready to move off their parents’ health insurance-and the oldest is nearly 40.īut just because millennials are starting to discover the joys of lower back pain doesn’t mean they’ve progressed through other rites of passage of adulthood. Millennials aren’t young twentysomethings anymore.

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