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Investing for Young Adults

Investing for Young Adults

December 02, 2020

One of the most beneficial things a young adult can do is learn how to manage their money. Young adults prioritize careers, buying a home and starting a family, but saving for their future can feel overwhelming. At Zephyrus Financial Services, we work with you to help achieve your short-term financial goals and your long-term retirement goals. We have four easy steps to help you get started.


  1. Start Saving

When it comes to saving money, it matters less how much money you can set aside. What matters more is you get started. It’s important to note there is a difference between putting money in a savings account and investing money in a retirement account. Thanks to the power of compounding interest, a 25-year-old who starts investing in their retirement can potentially be a millionaire by age 60 by investing half as much each year as someone who starts at age 35.¹ The sooner you start putting $20, $50 or $100 in a retirement savings account, the longer your money will have to grow.


  1. Choose Your Investment Accounts

Now the big question is where to invest your money to reap the most benefits. The stock market is one way you can grow your money over time. It can be intimidating to start, especially with the market volatility we’ve seen in 2020. Although we can experience downturns in the markets, over the long-term, the stock market has risen an average of 10% per year.² There are a few options for young adults to invest in the stock market:



An employer-sponsored 401(k) is an efficient way to save for retirement because contributions can be made directly from your paycheck. If the money is going straight from your paycheck into your account, you will be less tempted to spend it. Employers also typically match a certain percentage of your contributions. Don’t leave that money sitting on the table. We recommend you save 10-15% of your salary in your retirement accounts. Annual contribution limits have increased in 2020. Those younger than 50 can save up to $19,500 in their 401(k).


Roth IRAs

A Roth IRA may be a good option for young people for the long-term tax benefits. Contributions to this type of account are made with after-tax dollars, meaning you are taxed today. While you don’t get an immediate tax break, the advantage is the money grows tax-free and withdrawals are tax-free in retirement. This account works well for young people as they start their career in a lower tax bracket.


  1. Understand Your Risk Tolerance

Young investors are in a unique position to take risks with their investments, because they have time on their side. Investors in their 20s and 30s have several decades before they will need their investments to provide consistent income in retirement, giving them time to recover from any losses. But all too often, we’ve seen portfolios with way too much risk, even for a young person. Your risk tolerance isn’t based solely on your age but also your comfortability with putting money at risk. General financial advice doesn’t always work for everyone. Not all young people can stomach a larger portion of their portfolio in riskier investments. We take a personalized approach with each client and outline investments that match their risk tolerance.


  1. Work with a Financial Professional

We work with people of all ages. During our first meeting, we spend time listening to stories about your family, hobbies and dreams. We make it a priority to get to know you before creating your financial roadmap. Educating clients about their money and making sure they understand what we are doing is our priority. We walk clients through every part of their individualized roadmap using a software program that can show them how we can help them pursue their goals.


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¹This example is for illustrative purposes only and the return is not indicative of any actual investment.  Actual investment results may differ substantially. 


² Past performance is not a guarantee of future results