Remember way back when you were selling lemonade at the end of your driveway or mowing your neighbors’ lawn for a little extra money. How many times did you parents say, “Save, Save, Save your money…put those dollars in the piggy bank…?” Their advice was certainly reasonable. In the late 80’s and early 90’s banks were paying 5-10% for savings accounts - a very nice return for a traditional savings bank.
However saving for the sake of saving isn’t going to augment your wealth as fast as your would like. Today, banks are paying less than 0.5% of interest on your savings account. Natural inflation pushes prices of items we regularly purchase about 3% higher. So every dollar you leave in the bank loses about 3 cents every year. The age of savings is over. The age of investment is upon us!
Instead of putting your paycheck into your savings account, you should put it in your investment account. Whether you invest in mutual funds, ETFs, trusts, or bonds, the upside potential to increase the value of your investment is far greater than any traditional bank can offer. It is important to mention, there is no guarantee your investment will increase in value. Speaking with an investment professional for guidance or performing your own research is an absolute must. History has shown that qualified funds and managers of the aforementioned investment vehicles are likely to increase in value over the course of several years.
When I was 22 years old, I just entered into the work force. I was making $28,000 a year as an assistant. Instead of putting my pay-check into my savings account, I opened a TD Ameritrade account. With an initial investment of $2,500 and very minimal research, I found 3 mutual funds I was comfortable to invest in. Each fund returned modest rates over the previous 5 years. I regularly contributed to the funds each pay period instead of putting the money into my bank account. It wasn’t long thereafter I noticed my TD account grow from $2,500 to over $60,000 in just 2 years. I then used that money to buy my first house at 24 years old. If I had put my paycheck into my savings account for those 2 years instead of the selected mutual funds, I would have had less than $10,000. The mutual funds I had selected yielded an average of 47% return over the 2 year period. The compounding growth on my money with my regular contributions helped me achieve my goal of homeownership far greater than any bank account could.
Saving your paycheck in traditional banks is good…but investing your paycheck can return far greater results for you.
Welcome to the Young Professionals of America. The YPOA is a community of successful young professionals who have established themselves in and built careers across many industries. Whether you’re an accountant, a teacher, a financial advisor, or an engineer, the success stories and strategies shared by our professionals will help you land your dream job, get noticed, build a client base, and advance your career. It's not rocket science; it's common sense… but as they say, common sense ain’t so common.×