Content

• To step
• Part 1 of 3: Learning the basics
• Part 2 of 3: Understanding savings and investment options
• Part 3 of 3: Increase your investable euros
• Tips

You are never too young to start saving and investing. People who start investing at a young age are more likely to develop habits that will last a lifetime. The sooner you start investing, the more money you will accumulate over time. To find extra euros to invest, you can start your own business. Anyone can find money to invest by analyzing and changing spending habits.

To step

Part 1 of 3: Learning the basics

1. Start early. When you want to build wealth, time is the most important factor. The longer you save and invest, the more likely you are to achieve your goals and build significant wealth.
   • You can set aside more money to invest over a long period of time than over a short period of time. That may seem obvious, but many people don't realize how powerful the effect of time can be on the accumulation of wealth.
   • For example, if you can afford to save $ 50 a month starting at age 5 (assuming someone starts putting money aside for you), then by age 65 you will have saved $ 36,000 . (€ 50 per month x 12 months per year x 60 years) or (€ 50 x 12 x 60 = € 36,000). That is excluding profit on the euros you invest.
   • If you started saving at the age of 50, you would have to save 200 euros per month to reach the same 36,000 euros when you are 65 (200 euros x 12 x 15 years).
   • Starting early investing gives you more time to make up for any investment losses that will occur in some years. Investors starting later have less time to make up for any investment losses. Time will cause your investments to increase in value.
   • The Standard and Poor's (S and P) 500 is an index of 500 major stocks. From 1928 to 2014, the average annual return is about 10%. While there have been negative returns in some years, long-term investors have benefited from owning this index of stocks.
2. Make regular deposits. The frequency of your deposits (e.g. weekly, monthly or yearly) has a significant impact on your long-term success. If you often forget to deposit money into your savings account, arrange an automatic monthly transfer from your checking account (e.g. € 100 per month).
   • Saving is the process of transferring money to a separate bank account. You split money between a savings account and a personal checking account.
   • This process helps ensure that you don't spend the amount you plan to save. You can then invest your savings in savings deposits, stocks, bonds or other types of investments.
   • By saving money more often, you can add less money every time you contribute. This can make it easier to fit any investment into your personal budget. For example, from the age of five you can save 12.50 euros per week (based on a four-week month). You can also save € 50 per month or € 600 per year. The total you invest is the same, but it is easier to save smaller amounts more often.
3. Use compound interest when you invest. As soon as your funds are in the savings account, you should start investing them as soon as possible. You get more return from an investment. When you transfer savings to an investment vehicle, you should take advantage of compound interest.
   • Compound interest makes your investments grow faster, like a snowball rolling downhill. The longer it rolls, the faster it grows. Compound interest works faster if you invest money more often.
   • When you put together your investments, you earn "interest on interest." Over time, you will earn interest on both your original investment and the interest you previously earned.
4. Use "dollar cost averaging". The index value of each investment may be higher or lower in any given year. Over time, however, the index has generated an average return of about 10% per year. You can use "dollar cost averaging" to take advantage of a fall in the value of an investment in the short term.
   • When you invest using "dollar cost averaging", you invest the same amount in euros every month.
   • Dollar cost averaging is mostly used with stocks and mutual funds. Both investments are bought in stocks (shares or mutual fund shares).
   • When the share price falls, you end up buying more shares. For example, suppose you invest $ 500 every month. If the share price is $ 50, you buy 10 shares. Suppose the share price falls to $ 25. The next time you invest $ 500, you buy 20 shares.
   • "Dollar cost averaging" can lower your cost per share. As the stock price rises over time, a lower cost per share increases your earnings.
5. Have your assets put together. When you invest in bonds, compound interest is the multiplier effect of interest on the interest. With stocks, compound interest or interest is generating a profit on your previous dividends. In either case, you must reinvest the interest or dividends that your investments earn.
   • Frequency and time are also important. A higher composition frequency means that you receive and reinvest income more often. The more often this happens and the longer you let this continue, the stronger the effect.
   • For example, suppose you start saving $ 100 per month at the age of 25, and you earn 6% interest. By the age of 65 you will have saved 48,000 euros. However, that money can grow to nearly 200,000 euros, if you add up the interest over that 40-year period each month.
   • Another case would be when you wait to save until you are 40, but decide to save $ 200 a month at the same 6% interest. By the age of 65 you have invested 60,000 euros. However, you don't have that much time to build your interest every month. As a result, you have only saved $ 138,600 for retirement (instead of the roughly $ 200,000 in the previous example). You will have saved more money, but putting it together will ultimately yield less money.

Part 2 of 3: Understanding savings and investment options

1. Use a savings account or buy a certificate of deposit. A savings account gives you access to your money at any time with a very low risk. However, this option yields little or no interest. A certificate of deposit offers a slightly better return, but with less flexibility. You must leave the money with the bank for a period of months to years.
   • These investments have several advantages. They are easy to set up, and usually insured up to a certain amount (100,000 euros by the Dutch Central Bank), which means that they are very safe.
   • The downside is that these investments pay very little interest. You don't generate that much compound interest without a lot of interest. As a result, savings deposits and savings accounts are only suitable for storing small amounts of money for a very short period of time. In times of high interest rates, they can become more useful as a savings tool.
   • Smaller banks and credit unions will sometimes offer higher interest rates to lure customers away from larger institutions.
2. Invest in state or municipal bonds. When you buy bonds, you lend money to a government or municipality. You can also invest in bonds issued by companies.
   • Bonds pay a fixed interest on your investment every year. You can reinvest your interest in more bonds and make compound interest work for you.
   • Payment of your original investment (principal) and your interest is based on the creditworthiness of the issuer. Government and municipal bonds are often guaranteed by the fiscal euros collected by the issuer, so the risk is low.
   • The payments of a corporate bond are based on the creditworthiness of the company. A company that generates consistent income will have better credit.
   • You can buy bonds through your bank or through a financial advisor.
   • There is a downside to investing in bonds. When interest rates are low, returns can be small. Even in times of higher interest rates, bonds usually offer lower returns than stocks. However, bonds are normally considered less risky than stocks.
   • The average yield on bonds since 1928 (including compound interest) is 6.7% per annum, compared to 10% for stocks.
3. Buy shares. When you buy stock, you partly own that company. Investors in shares are also referred to as equity investors. Investors buy shares to earn dividends and take advantage of a rise in the share price.
   • Stocks offer higher returns on average than most other types of investments. Shares may offer a higher return, but they also involve more risks. The longer you can invest in stocks, the more time you have to recover from a price drop.
   • If the company generates income, it may choose to distribute some of that income as a dividend to the shareholders.
   • You can buy shares by opening an investment account. You will then have to request a new bill. Once your account is opened, you can deposit money and buy shares. Consider hiring a financial advisor to invest in stocks.
   • Buying individual stocks is more risky than investing in a mutual fund or ETF (Exchange Traded Fund).
4. Invest in a mutual fund. A mutual fund is a pool of money to which many investors contribute.The funds are invested in securities, such as bonds or stocks. The mutual fund portfolio may generate interest on bonds or income from stock dividend. Investors in funds can also benefit if a security is sold for a profit.
   • Mutual fund accounts are easy to open and maintain. Investors pay the fund for money management. You can regularly put money into your investment and reinvest your profits, if you wish.
   • The funds allow you to invest in various stocks and bonds. This provides security through diversity and protects you from losing money when only a few securities fall in value.
   • Most mutual funds allow you to invest with a small initial amount and add small, periodic investments. If you don't have a lot to invest, this is important. Some funds allow you to start with as little as € 1000 and deposit in increments of as little as € 50 or € 100.
5. Trade Exchange Traded Funds (ETFs). An ETF is a type of marketable security that acts as a cross between a mutual fund and a stock. You can trade ETFs through a broker or an electronic advisor, such as Betterment. ETFs have the advantage of costing less and being more tax efficient than individual stocks.
   • Some of the most popular ETFs include the SPDR S&P 500, the SPDR Dow Jones Industrial Average, and various sector and commodity ETFs.
6. Take advantage of retirement plans with doubled contributions. If your job offers a retirement plan, see if your employer will match your contributions to your retirement account. If so, this is a great way to both save money and build capital quickly.
   • Perhaps this could be matched with retirement savings (or, as in the US, a SIMPLE pension plan or a 403 (b)).
   • Your employer can add up to one full euro for every euro you put into your retirement account, up to a certain percentage of your salary (e.g. up to 3%).
7. Look at other investment options. Aside from stocks, bonds and mutual funds, you may also be able to invest in other areas. Do some research in the current market to find out which investment opportunities are most likely to be profitable. A few good places to invest are:
   • Peer to Peer Loans. Use platforms such as Lending Club and Prosper to provide small loans to individuals who have difficulty obtaining bank loans. You can score a return of 6% or higher.
   • Property. If you don't have the money to buy investment property, you can use companies such as Fundraise to invest a small amount of money in commercial property owned by the company.
8. Know what costs are possible for your investments. Some investments require a lot of fees that can cut your returns significantly. Before making an investment, read the fine print and talk to your financial advisor (if you have one) about what kind of costs to expect. Some common types of costs are:
   • Operating costs of mutual investment funds
   • Investment management or advisory fees
   • Transaction fees that may be charged anytime you buy or sell a mutual fund or stock.
   • Annual Account Fee or Custody Fee

Part 3 of 3: Increase your investable euros

1. Consider starting a business. If you have a full-time job, you can increase your investable income by starting a part-time business. Use the extra income to increase your monthly investment. By increasing your investment, you will build up capital faster.
   • Take a micro job. A new business trend is hiring people to perform small, specific tasks. For example, a writer can review resumes for job candidates. Since each project only takes a small amount of time, you can take these jobs to generate more income.
   • You may find that you can do enough business to eventually create a full-time job for yourself.
2. Turn your hobby into a business. If you are passionate about a hobby, you can turn that hobby into a business. For example, suppose you like to surf. If you develop sufficient expertise, you may be able to solve a problem for other surfers. Maybe you can design a new surfboard based on your browsing experience.
   • Successful business products and services solve a problem for the customer. Ask other surfers what problems they encounter. Maybe you can come up with a solution.
3. Take your personal spending habits seriously. If you don't create a formal budget for yourself, you may be wasting money that you can spend on investments. Make a budget using your labor and all your expenses.
   • Look at your monthly variable expenses. Some expenses, such as the payment for your car and the mortgage on your house, are fixed. Other types of expenses, such as money for groceries, gas, or entertainment, are variable.
   • Make sure you also take your fixed expenses into account. This includes things like your rent or mortgage payments, insurance premiums, and monthly loan repayments.
   • Check out the money you spend on entertainment every month. Suppose you spend $ 300 on movies and eating out. You decide to put € 100 of that expenditure into your investment plan. If you do this faithfully every month, it will help you accumulate wealth in the long run.
   • Depending on your circumstances, you may also be able to cut costs by refinancing your mortgage or by selling your car and using public transportation instead.

Tips

• Consider using an investment application such as Acorns to help you build savings or manage regular transfers to your savings account.