Q: I’m a young adult (22) who just graduated from college. What advice do you have for young adults like me who appreciate the importance of investing young and want to learn to invest responsibly, but have little money to invest?
A: I started out myself by scraping together what little extra money I could find at the end of the week. But as my nephew, Cliff Mason, said in a controversial set of articles in TheStreet.com, many youngsters fresh out of school must first gauge whether those few extra hard-earned dollars will make you happier in the near term, [be it from] buying that new Xbox game or spending a night out on the town. If you feel you’ve made peace with that aspect of twenty-something life, I believe that young people should start putting away as much as they can afford, either in index funds or an employer-sponsored retirement plan. Until you get up to $5,000 or $10,000 in a non-retirement account, I believe that folks of any age are generally better off staying away from investing in individual stocks.
Q: I’m still in my twenties, but cognizant enough to know that Social Security is a waste of my time and money. What do you believe are the most effective ways that a twenty-something can ensure that retirement funds will be available when we enter our sixties, while we wait for the failure of the Social Security tax?
A: Start putting away as much disposable income as you can afford to, and maintain a diversified investment portfolio. Also, I believe that young folks should not be afraid to take more risks. If they pay off, you could be set for some time. And even if they fizzle out, if you’re willing to learn from your mistakes, you still have a few decades before retirement to make up for the losses.