If just got my first job. When should I start investing?
You’ve probably read articles where you are encouraged to start investing just as soon as you can. Because of the benefits of compound interest/compound returns, the earlier you invest, the more your money will be worth. So, we echo these sentiments – start to save and invest just as soon as you can. In fact, we have a section on our website devoted to someone who is pursuing education or getting their first job.
But practically, when I have very little money and potential student debt hanging over me, when should I start putting money aside for investment? Here are some quick tips:
#1. Don’t try to invest until you get a regular job or a more steady income.
While it is great to save, until you get a regular income you won’t have confidence that you can leave in your investments for a long period of time. There is nothing worse than being forced to sell when the market is down or taking a penalty if you have to take money out of a retirement account (RRSP). So by all means save money but until you get a regular income, keep that money in the bank or in short term cash investments.
#2. Once you start making regular money, get into the habit of saving and investing by starting to invest a small amount of money each pay period.
Creating good habits is critical to long term success and that’s not just in financial matters. So if you can get into the habit of putting even a little bit of money aside each time you get paid, you’ll tend to continue those habits as the amount you can put aside gets bigger. If your company offers a RRSP, by all means start making contributions as this is the best investment available to most people. Also, many companies match contributions (more here). If you can't meet the minimum contribution amount then just put aside a small amount each pay period – even $10 is fine. You can just save that money or put it in a mutual fund or ETF.
#3 Pay off high interest debt before putting aside more than a token amount.
While we encourage you to put a little aside each pay period, if you are paying off credit card debt, high interest auto loans or student loans, definitely pay those off first before increasing the amount you put aside to invest. But if you have no high interest debt outstanding and you have put aside some emergency funds to cover unexpected expenses, then by all means start increasing the amount to put aside each pay period – you’ll be a very happy period in 30-40 years.