Make Investing Simple Whether you’re putting away your first $1,000 or have been saving for the future for years, you’re going to want to consider investing your funds at some point. Doing so will allow you to maximize returns and exponentially grow your savings. Unfortunately, the investment process can be pretty intimidating, especially if you are starting out on your own. It’s hard to know how to begin, where to invest, how to balance your portfolio and even what sort of fees you should expect to pay along the way. That’s where the convenience and ease of today’s best investment apps can come into play. [youmaylike] What are Investment Apps? Once upon a time, your only choice for investing was to pick up the phone and call your stock broker to initiate a trade. You were charged for the service, either based on commission or as a flat fee per transaction. While stock brokers are still an option, you can take investing into your own hands these days, without ever needing to talk to another human. And it’s all thanks to investment apps and platforms. Today’s apps offer a range of services and features. With them, users can: Research funds and individual stocks. View fees and expenses related to investment choices. Invest funds on the go, and even automate regular contributions. Automatically reinvest earnings on current investments. Adjust portfolio for personal risk tolerance. View performance projections. Choose funds or individual stocks that align with personal beliefs, through portfolios based on socially-responsible missions. The best part? Investing through trusted apps is usually cheaper and faster and you’ll have instant access to your portfolio/reports at any time of day. Not only that, but you’ll also be able to set your investment risk tolerance, rebalance your portfolio and even reinvest earnings automatically. Who are Investment Apps Designed For? Whether you’ve been playing the market for ages or are ready to invest your first $100, the right investment app is worth considering. For those new to the stock market, apps will simplify the process and put the power of investing at your fingertips… literally. From your phone or computer, you can easily see portfolio recommendations based on your own goals, savings plans and even risk tolerances. The right app will tell you upfront how much you can expect to spend in fees throughout the year, and can even allow you to automate many of the more confusing aspects, such as picking well-performing stocks or even rebalancing. While investment apps are ideal for beginners, newbies aren’t the only ones who will see the benefits. Even seasoned investors will find the process easy to use, and may even learn that these platforms can maximize returns (and save them money in fees) along the way. Not to mention, many investment apps offer additional insight into specific funds, so you can choose to invest in companies that align with your own passions and beliefs. Now that you know why you should consider using an investment app for your own savings, let’s take a look at some of the best ones available today. Best Investment Apps Great for Beginners: Acorns Fees and expenses: For investors with less than $1 million invested, fees are between $1-3 per month depending on the account option you choose. Acorns is also free for college students. Beginning investment requirement: At least $5 to start Types of investments available: ETFs (exchange-traded funds) Portfolio options: Conservative, Moderately Conservative, Moderate, Moderately Aggressive, Aggressive Automatic investing?: Yes Automatic reinvesting?: Yes Automatic rebalancing?: Yes If you want an easy, hands-off approach to investing that won’t leave your head spinning, Acorns is a great first choice. This app not only simplifies investing for beginners but allows investors to completely automate the process from start to finish. After connecting the app to your debit card, the app will “round up” each of your daily purchases, putting the savings into an investment holding account. Once you reach the minimum required, Acorns will invest this money on your behalf, based on your account preferences. The app will also reinvest your earnings, as well as rebalance your portfolio when necessary. Great for Truly Free Investing: Robinhood Fees and expenses: Robinhood is a free investment platform in every sense of the word, pledging to never charge company fees or commissions to customers. Beginning investment requirement: You’ll need $2,000 to get started. Types of investments available: ETFs, stocks, cryptocurrency and options. Portfolio options: Interest-based options such as Fashion ETF, Tech ETF and Energy ETF, as well as a standard S&P 500 ETF, all with personal risk tolerance settings. You’ll also find “collections,” which are individual stocks grouped according to specific interests — such as companies with female CEOs or that are in the social media sector. Automatic investing: No. Automatic reinvesting: No. Automatic rebalancing: Yes. A great option for beginners and experienced investors alike, Robinhood makes the process both easy and affordable. How affordable? Well, it’s entirely free. By offering a truly free experience, Robinhood saves investors some serious cash over time. Additionally, the platform makes it easy to choose individual stocks or ETFs based on personal interests. If you want to invest in cryptocurrency or options, you can also do so through Robinhood. One of the biggest limitations of the platform, though, is its automation. While you can set up automatic deposits into your account, you will need to manually invest those funds and then reinvest (or withdraw) your dividends. Stash Fees and expenses: $1 per month fee for those with less than $5,000 invested, or $2 per month for retirement accounts with less than $5,000. For users under 25, fees on retirement accounts are waived. If you have more than $5,000 invested, your fee will be 0.25% annually. Beginning investment requirement: You’ll need at least $5 to begin investing (fractional shares are available) Types of investments available: ETFs (exchange-traded funds) and fractional stock shares Portfolio options: Too many to name, ranging from things you Want (portfolios that are conservative to aggressive mixes), things you Believe (such as groups of companies that believe in clean energy, LGBT rights, etc.), and things you Like (tech, retail and social media companies). Automatic investing: Yes. Automatic reinvesting: No. Automatic rebalancing: No. The closest competitor to Acorns, Stash seeks to make investing easy for everyone, regardless of your goals and passions. They have three account options to choose from, allowing you to manage your investment and retirement accounts, or even a child’s education savings through custodial accounts. With Auto-Stash, you can set any number of automatic investment options and transfers. However, Stash will not rebalance your portfolio for you, nor will they reinvest dividends on your behalf. Wealthfront Fees and expenses: 0.25% annually. Beginning investment requirement: $500 minimum initial investment. Types of investments available: ETFs (exchange-traded funds), individual stocks, retirement accounts (401k, IRA), 529 savings plans and trusts. Portfolio options: 11 asset classes to choose from, including natural resources and real estate. Automatic investing: Yes. Automatic reinvesting: Yes. Automatic rebalancing: Yes. Wealthfront’s investment platform is designed to be friendly for users of all experience levels. If you’re a seasoned investor, you’ll enjoy all of the options available to you, including the ability to manage your retirement accounts, education savings and even non-profits or trusts. If you’re a newbie, their free financial expertise center is the perfect place to learn all about investing and your future. TD Ameritrade Fees and expenses: The managed, automatic portfolio investment option (called Essential Portfolios) is available with a 0.30% advisory fee. Beginning investment requirement: $5,000 minimum for managed portfolios (no minimum requirement for traditional trading). Types of investments available: Stocks, ETFs, options, mutual funds, futures, bonds/CDs, Forex and cryptocurrency. Portfolio options: Essential Portfolios (EP) offer investors a range of options from Conservative to Aggressive, based on your passions, preferences and tolerances. Automatic investing: Yes, with EP. Automatic reinvesting: Yes. Automatic rebalancing: Yes. A more traditional brokerage app, TD Ameritrade is one of the most recognizable names in the industry. You can easily educate yourself on all things financial, thanks to their free videos and posts. If you want a traditional experience, you can choose your trades and pay per transaction. Prefer a more streamlined, automated approach? Opt for their Essential Portfolios, a hands-off investment option (robo-advisor) that charges a flat monthly fee and requires little-to-no oversight from you. Plus, their app makes the investing process easier than ever with a user-friendly interface, price alerts and no minimum to get started. If you prefer a desktop experience, this is also available to you through TD Ameritrade. Bottom Line Getting started with investing can be intimidating. With all of the terminology and account options out there, it’s easy to want to run and hide. Thanks to some of today’s best investment apps, though, you can not only get started with your first portfolio but also watch your money quickly grow… no matter how much of a beginner you may be! It’s important to choose an app that offers you the portfolio options and features you want most, with fees and deposit minimums that match your financial needs. The five apps above are our favorites for beginners, making that first foray into investing easier than ever before. The hardest part will be choosing the one you love most!
Budgeting for Young Adults: How to Become Financially Independent from Your Parents
Even though many American high schools now teach the basics of personal finance, most grads are ill-prepared for the real world.
There are a few different reasons why this version of personal finance education doesn’t work. Most kids don’t retain much of what they learn; they’re just there to pass the test and move on. Many assume the real world will be easy, since personal finance doesn’t seem like much more than basic math. They forget it’s the psychology of personal finance that’s the difficult part.
If you’re a young adult who’s struggling with your new real-world money responsibilities, or are a parent to one, this article is for you. Let’s take a closer look at how you can make your own budget and work towards becoming financially independent from your parents, including potential pitfalls you can’t afford to ignore.
Why Learn Now?
Many young folks have a similar attitude, especially when they’re in college. They’re worried about living life to its fullest, even if that means emerging from school with substantial debt. That’s a problem for their future selves. After all, college only comes around once. It’s best to maximize the experience.
But this attitude can impact your life for years down the road. Having student loan debt can affect everything from potential relationships to buying a house. You might want to pursue a career path that is more satisfying but doesn’t pay as much. Having a bunch of debt will make that much more difficult.
And then there’s the stress of having debt. If the economy tanks – like it is today – you’ll have enough to worry about without having to keep creditors happy. Having an emergency fund also helps in periods of economic uncertainty, and it’s hard to have that buffer if you’re also worried about paying off debt.
How Parents Can Help
Millions of American parents witness their adult children struggle with their finances, a number that would undoubtedly be much higher if these kids were completely honest about their financial picture.
Many parents help in a predictable way. They’ll simply cut a check to their child to help repay the debt. When the debt goes away, so should all the other problems associated with it.
But there are a few issues with this approach. It does nothing to address the underlying spending problem or other mismanagement that led to the debt in the first place. It also teaches a poor lesson. To really get the message, it’s much better to have children work through their money problems, rather than getting a bailout. I know many frustrated parents whose "one time" lifeline has turned into regular financial assistance.
Parents need to encourage their children to build successful money habits on their own. Once they’re confident that this new outlook has been cemented into place, then they can start giving financial rewards.
In the meantime, parents can still help in plenty of ways. They can offer to let a new graduate move back home to help them get a head start, for example. They just need to make sure their offspring are doing just that — working hard. They can offer to pay back the last 20% of their kids’ debt, a move that might give their children the motivation needed to succeed on their own. Or they can use a financial crisis as a teaching moment, cementing good habits right when they’re needed the most.
Learning these lessons is doubly important for children while they’re still at home. It’s a low stakes way to teach important financial rules that can have an impact for decades to come. Again, the same rules apply here. Parents should do their best to teach lessons, rather than simply throw money at problems. They can do things like rewarding their kids for getting a part-time job or making sure a portion of birthday money is saved.
How Young People Can Become Financially Independent from Their Parents
The part of budgeting that trips up most people is they don’t accurately separate needs from wants.
For example, you need a place to live. But the difference between spending $500/month on a bedroom with a shared kitchen and bathroom versus $2,000/month on your own luxury two-bedroom apartment is vast. It’s the same thing with food and transportation, the other big expenses.
I understand this can be difficult. Many newly graduated young adults are finally making a decent salary for the first time. They want to spend a little bit on luxuries after scrimping and saving for so many years. That’s okay, assuming your budget can afford it.
The key when making a budget is making sure you’re moving forward every month. That means putting money aside for savings and sticking to that plan. Many people have good intentions and then immediately rob the savings category as soon as something goes wrong.
One easy way to make sure you save is to pay yourself first. This is as simple as telling your bank to immediately transfer 10 to 15% of your paycheck to a savings account. Heck, you don’t even need to talk to anyone to make this happen. It’ll be an option in your online banking portal.
Maximizing your savings will ensure you pay off your debt and reach financial independence faster. The easiest way to do this is to relentlessly work at getting your three largest expenses down. Pick a cheap place to live. Take public transportation whenever possible, and if you can’t, settle on a reliable used car. The easy way to avoid spending too much on food is to pack your own lunch and eat dinner at home.
You might need to make some real sacrifices to really start getting ahead. Many 20-somethings simply can’t afford to live on their own in an expensive city. You might need to move somewhere smaller and cheaper. Or, you might have to start saying no when your friends want to go out. Lots of folks don’t want to make these tough decisions, so they suffer through years of debt and financial hardship.
The Bottom Line
In today’s tough COVID-19 affected economy, financial independence may seem like an elusive goal for a lot of young people. They can’t even find a job, never mind start to get ahead. But we will make it through this rough patch. There will be jobs waiting when the economy finally starts to reopen.
The choices made today can impact your life for years to come. A young person can choose to make smart decisions and relentlessly take steps to get out of debt (and build an emergency fund) faster. Or, they can take the easy route and continue to go backwards every month.
The choice is easy. Work relentlessly towards becoming financially independent from your parents. Your future self will thank you.