5 Best Investments In Your 20s With Great Rewards

In a few months, I am going to be thirty. Reflecting back, I could not have been where I am today without some serious decisions I made in my early and mid-twenties. Where exactly am I today in life, my good reader?

I am a graduate of two programs- engineering and surgical technology, with $0 student loan debt. Besides, I own a registered small manufacturing business- Elkheart Studio LLC in Texas. This is within a period of seven years of moving to the United States.

These are amongst other things I have been able to do, despite my challenges, mistakes and failures. But, what has this got to do with you?

Well, there are many conflicting advice on the best investments in your 20s. If you are reading this article, I suppose you are an adult who is starting out with your adult life. Having been where you are right now, I want to give you some practical advice which will set you up for success later in life.

What To Invest In Your 20s?

As a young adult, your goal is to set up the foundation which will guarantee your slow and steady progress towards your ideal success in life. Here are some investments you should not neglect at this stage of your life.

1. Invest In Education and Vocational Training In Your 20s

If you desire a life of financial independence, you need to acquire valuable skills. By valuable skills here, I refer to highly-sourced labor skills. This can be acquired in colleges or vocational training schools.

Now, I understand some young adults do not like colleges. Hell, I hated going to colleges while I was there. However, there are other training institutions out there.

A good example is a trade school. In a trade school, you are trained for six months to a year for highly-sourced skills. And, why is vocational education important for the youths?

A vocational education increase the prospects of employment.

According to Zip Recruiter, the National Average salary for vocational training is $41, 264. To put it in another way, it is $20 per hour. Similarly, the upper percentile for the training is $66, 000. Otherwise, it is an average of $22, 500 for lower percentile.

In practice, it depends on what you are trained. A Licensed Vocational Nurse had a median pay of $23.47 per hour in 2020, while a trained electrician had a median pay of $27.36 per hour. Both trained for one year in their respective programs. This is according to U.S Bureau of Labor Statistics.

Nevertheless, an education investment pays off well. This is regardless of whether it is a college education or a vocational education. It is a good way to invest your money in your 20s. This is because you need an education to be able to earn a moderate to a high income, before you consider any other kind of investments.

2. Invest In Used Depreciating Assets In Your 20s

As a young adult in your 20s, peer pressure makes you want to match what others do. In social settings, you want to look as good as your peers. As a result, you spend to impress.

In your late teens and early twenties, this tends to be the norm. This is because at such ages, we just want to impress and be liked by our peers. Given such naivety, such unnecessary expenditures may leave you broke in your late twenties and thirties.

Let me elaborate with an example.

It is not practical to buy a new car for $28, 000 when you make $18, 000 to $30, 000 annually. It may put you at an advantage socially, but it puts you at a serious disadvantage financially. Not only does the car depreciate in value very year, but also you are stuck paying it off for years to come.

When you shop at thrift stores, discount sales or brand used cars dealerships, you spare money for savings or other necessities. This is because you pay discounted price for the same value others pay full prices for. Want to know the best part of it?

According to a microeconomics theory- Utility, you derive a greater satisfaction and usefulness for the products than people who paid full prices. This is because you paid discounted prices for the same value. Hence, saving a lot.

As a young adult in your 20s, it is important to be stingy with your money at such age. This is because investing in used depreciating assets ensures you do not have a lot of debt going into your thirties. Trust me, the last thing you want is to enter your thirties with a lot of debt!

3. Invest In A Certificate Of Deposit (CD) Account In Your 20s

One of things to invest in your 20s is an interest paying savings account. Now, I know this is contrary to those gurus who advice you to put your money in cryptocurrency and stock market. But, let us be realistic for one minute.

Are you really an expert in cryptocurrency and stock market to put your hard-earned money into it?

Here is an alternative. Get step one- an education, accomplished. Then, get a job where you earn enough to save money. I trust this is going to be easy, because I have lived fairly comfortable before, making $1400 monthly.

With your education- college or vocational training, you can make more than that amount. This is especially, when you are in your early twenties. Here is a scenario below.

Let us say you make the national vocational training average of $41, 264 at the age of twenty. If you live in a state like mine where you do not pay state income tax, then your federal income tax will be about 15%. As a result, you bring home $35, 074.4. When you save $15, 000 of that money, you would have $150, 000 in cash at the age of thirty.

It is practical, is it not?

Here is the thing, good reader. Inflation depreciates currency. Given your young age, I will advice you to sign up for a Certificate of Deposit account. A CD account is a contract with your bank, where your bank saves your money for a certain period of time while paying you an interest rate of up to 1% per year on the savings. During the time period, you cannot withdraw the money until the contract period ends.

Why Would Someone Open A CD Account?

Surely, it is a great way to establish some serious saving discipline while saving some money. Using the previous example, you can commit the $15, 000 into this kind of saving account. At the age of 30, you will have your $150, 000 and accrued interest.

Listen, let me be real with you. Do not try to pull your savings and invest into other financial securities, unless you are an expert in those financial securities. As an adult who is in his or her 20s, you are young. Therefore, save the money in CDs until you have the experience to move it into a suitable investment.

By then, you will have a huge capital under your command to make some serious investment moves. Hell with $150, 000 at the age of 30, you can get into real estate. Get where I am going now, friend?

This is the best way to invest as a young adult with no finance experience. Forget about the penny stock gurus or the bitcoin masters. Save your money because once you hit late twenties, you will start seeing investment opportunities your early and mid-twenties might have missed.

Is this the Best Way To Save Money As A Young Adult?

If you are a young adult in your 20s with no advance financial market knowledge, it is the best way. Look at it from this perspective. Using the example I gave you earlier, you can outmatch an average worker who contributes only $500 annually in their retirement account and spend the rest.

This is because by the time you are 30 years old, you will have enough capital and knowledge to establish some money cows. As for inflation, the inflation rate is very slow in the United States of America. According to Macro Trends Network, the US currency inflation has fluctuated between 0.12% to 5.40% from 1990 to 2020. On 2020 alone, it dropped to 1.23%.

The last ten years- 2012 to 2021, has seen the United States currency inflation fluctuates from 0.12% to 2.40%. By the way, 2.40% is the highest inflation rate ever recorded within the decade.

What does this mean for a young adult in his or her 20s, dear reader?

When you save those money from your early twenties to your late twenties, it would not devalue like most gurus will have you believed. In fact, it is the safest option for any young adult. With more than a $100, 000 in saving according to the example, you can make serious money moves which guarantees total financial independence.

4. Invest In Professional Networks

Networking leads to more business opportunities. Did you know that?

If you are in your 20s, it is a stage in your life to lay the foundation on which your ideal success rests on. Hence, why it is important to have a network. By network here, I refer to successful people who are already in your field of interest.

A professional network can help you get into careers or job positions. In the adult world, it is about who you know. I know you think it is not, but it is how it works. Do not be naive to think otherwise.

A job which pays well, can open up to you when you have great references. Or even better, a recommendation from an established figure in the field of interest. Especially someone who has seen your work input and output.

Therefore, put yourself out there. Get involved in meetings, social gatherings and professional events. Connect with people and exchange business cards. Then, form a professional relationship with them. This is one of the best investments with high returns.

It is how you increase your chances of being successful later in life. This is because a professional network who knows you well, will recommend opportunities as you keep growing in life, work & responsibilities. You would be surprised the length people will go to help you succeed, when you have got the potential.

5. Invest In A Defined Contribution Plan In Your 20s

What kind of plan is a Defined Contribution Plan?

A defined contribution plan is a retirement plan which every company in the United States offers to their employees. A certain percentage of your income is deducted and invested on your behalf, while its capital gains are tax-free until you decide to cash out.

Two notable examples of a defined contribution plan is a 401k and a 403b.

Immediately you become a working class adult, it is important to sign up for a defined contribution (DC) retirement plan. This is because it increases your retirement fund, since you start early. Also, some employers can match whatever you put aside annually. Meaning- when you put aside $600 monthly, your employer may match up to $600. Altogether, you will have up to $1200 invested monthly for your retirement.

The best part of a defined contribution plan is you can roll over your fund, when you change a job. So, you will not lose your money at all. Now, imagine you start putting aside $200 monthly which is matched by an employer for ten years.

Given a capital gain of 4% per year for your defined contribution plan, you will have $67, 200 in retirement fund in ten years. Say you start at age 20, you will be worth 6.7% of a million by the age of 30. This is one of the best investments with high returns, is it not?

You can do this while still saving money. I know the 20s seems to be the most fun part of the life, but it does not necessarily have to leave you broke in your thirties. You can still enjoy a great life living frugally. And, it involves putting as much as you can on your retirement fund.

It is one of the best investments in your 20s.

Conclusion On the Best Way To Invest As A Young Adult In Your 20s

If you follow these above steps, you will definitely set yourself up for financial freedom. Listen, I am going to be honest with you. You do not need to make a lot of money to be financially independent. You just need to make enough to save.

As a young adult in your 20s, this is stage where you can set the foundation for your ideal success. Firstly, get an education which increases the prospects of employment. Then, get a job where you can make enough to save. As soon as you get a job, sign up for retirement contribution plan with your company and start stashing away.

This is while living frugally and saving some money. Trust me, these are the best financial advice for young people. You will not regret it one bit once you hit your thirties. Besides going into your thirties with zero debt, your financial future will look promising!