Growing up in an immigrant household in the ’80s, we didn’t talk about money — like, at all. Cash was king (ahem, queen), and stashing money under the mattress was a thing that actually happened (I know, you thought it was just in the movies). Having money in a savings account at a bank? Nope. A sit-down chat about how to invest wisely? Definitely not.
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Even as I started to learn the language of money while working my first job, reporting from the floor of the Chicago Mercantile Exchange, I didn’t feel up to investing, mainly because I wasn’t yet fluent in that language. I was contributing to a 401k, but only because HR had suggested it, and I did not yet know or understand how many other options I had (many of them better than a 401k for growing my modest monthly paycheck). But here’s the word that kicked it into gear for me: inflation.
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In general terms, inflation is the slow and steady upward creep of prices for common goods and services — and, as a result, the decline of purchasing power. Stuff gets more expensive over time, and therefore people can’t buy as much. Inflation is expected to grow by 3 percent per year, every year, which is why making more than that by investing is so important; otherwise, your money will be worth less tomorrow than it is today.
So, by stashing cash under your mattress, or even in a 401k, that means you’re losing money in inflation-adjusted terms. But, by investing in the market over a long period (making you about 7 percent, adjusted for inflation), you are making your money grow faster than the would-be inflation robber.
Even though my parents didn’t teach me anything about stocks, I got down to business and learned to speak the language so I could join the investors club on my own. Here’s a crash course in investing so you can get in on it, too.
1. Make Sure You’ve Got Your Own Back
Yes, growing your money through investing is important, but not if the other areas of your financial life are out of order. Before you take your first investing steps, make sure you have at least six to nine months of savings in the bank, your credit cards are paid off, you’re working consistently on any longer-term debt (like student loans), you’re regularly contributing to your retirement and you have money saved to start investing (typically minimums range from $500-$2,500).
2. You Already Know More Than You Think You Do
It’s fair to say you probably shop from time to time and can garner which stores/brands are busier than others. Consumers like you and me drive sales, profits and — you guessed it — stock prices. A great place to figure out where you want to start investing is by looking at the companies/brands in which you believe.