Written by: Sam Djurfeldt
There are many large purchases you will likely make in your lifetime. Whether this is purchasing a car, or buying an apartment or home, these purchases involve spending a lot of your savings. The best way to save for these large life purchases is to start investing your money when you’re young!
Aren’t I too young to invest?
Despite what many think, you can start investing as soon as you have a Social Insurance Number (SIN). Before you turn 18, your parents must make a discretionary investment account under your name which you are able to invest in. Alternatively, your parents can open a Registered Education Savings Plan (RESP) under your name. Once you turn 18, you can take control of all of your savings and investment accounts as well as making new ones.
How can I invest?
Aside from bank accounts, you can also use useful and free investing apps that don’t require a traditional bank investment account. Wealthsimple is the most common app which takes away the stress of choosing investments. You simply add money to your account on this app and it safely and effectively invests it for you. A more hands-on option is the Wealthsimple Trade app which allows you to choose your own investments. With this app, you can choose to invest in stocks, bonds, or ETF’s for free. Whether it is visiting your local bank to ask questions, asking family and friends, or using a free investing app, it has never been easier to invest your money.
How much money should I invest?
The amount of money you invest will vary for everyone and depends on a few factors. Within your budget, you have to handle all of your obligations and payments first. The amount you invest should be a portion of your income that you don’t need to use for short-term purchases or living expenses. Be careful not to invest too much money without first budgeting your monthly expenses!
What should my risk tolerance be?
A risk tolerance is the amount of risk you have the ability to bear with your investments. As an example, as the stock market fluctuates, your investments may be valued higher during some years and lower in others. If you start to invest at the age of eighteen, you will likely remain invested until you need the money for a large purchase or downpayment on a car, house, or apartment. This means you can keep your money in the market for a longer period of time, and
have a higher risk tolerance. Those who are younger and therefore have a longer investing period (remain invested from age 20-45) have a higher risk tolerance. If you are 75, and want a guaranteed return when you retire in five years, you would have a lower risk tolerance. In this case, a guaranteed investment certificate (GIC) or a 5-year bond would be more favorable.
The good thing is that if you start investing for these purchases early, you will be much better prepared for them! Investing doesn’t have to be complicated, or hard to achieve. One of the best choices you can make as a young adult is to start investing money that you are able to. Stay tuned for the second blog post where we will go more in depth about different investment options!