By: Tanner Shotwell
FAYETTEVILLE, Ark. (UATV) – For young adults to become financially independent, they need to educate themselves on how to invest their money.
The method of compounding pays dividends to the people who start the earliest. Compounding is a way to exponentially grow money which makes its biggest leaps towards the end of the tenure. Investing apps ad websites have become readily available through the access of technology, but understanding where to put your money is crucial to achieving financial freedom.
Young adults right out of college tend to make a decent amount of money they’ve yet to make, and the urge to buy materialistic things rather than invest is present. One graduate assistant for the finance department, Spencer Wyld says investing money can lead to financial freedom.
“It’s gonna be very tempting to spend that money, but if you want to get financially independent quicker and be able to afford a house a lot quicker than some of your peers, put that money away.“
Wyld also says understanding risk assessment when investing is crucial to making the right decisions. Market volatility, risk, length, return, and type of account are all things to consider before investing hard-earned money.
Investing can be intimidating. According to Bankrate, only 18% of 18-25-year-olds invest in the stock market and in their retirement.
Finance professor, Dale Carlton says opening a Roth IRA account is a safe way for young adults to invest.
“There’s one thing I know for sure and there’s going to be a lot of people that call me in 20-30 years if I’m still alive and say Dale thank you so much for forcing me to put my money into the Roth IRA because when they pull it out, taxes are already paid.”
A Roth IRA allows you to pay taxes on the small amount you put in rather than paying taxes on the large amount you withdraw. A regular IRA requires taxes to be paid on the withdrawal instead of the deposit.
Carlton also says investing in real estate is another avenue to financial freedom if the stock market is underperforming.
“Real estate however has a number of things that kinda help out, one is it does appreciate, it has beat inflation traditionally from decade to decade but its also a way for you to get in and place your money somewhere where your returning on it instead of someone else making money off you.”
Investing is a patience game that the majority of young adults are unwilling to play, but the potential return can make you financially free. Financial freedom means having complete control over your own time without having to trade time for money.