Investing wisely takes years of experience, therefore it’s best done when carefully planned at an early age. Parents should help their children understand the value of money and this is best done if they are taught how to invest their time and money toward earning much sought after items. In time, saving for toys, cars and will give way to saving for investments.
As a guarantee against superfluous investments hoping for earning quick cash, money that’s slated toward gambling on Wall Street should be money set aside for investment purposes only. If the money is lost, there will still be money for the monthly mortgage, food for the table and for that planned summer next summer.
As parents begin saving for college for their children, they might portion off a part of their savings for this purpose. But it all depends on age and the needs of the individual; a healthy young individual may take more risk when investing—depending on their income and their stage in life.
Hopefully, they’ll not go overboard and make investing a gambling habit, but as one that is in line to get them quicker to their mapped out goals, marriage, a family, a bigger house, college for the children, etc. Investments are other things of value instead of the obvious—making a windfall by buying and selling stocks—it’s buying that house, putting aside for college for kids, and then tentatively, once the children are on their own, setting aside investment money for retirement.
If no goals are set, then there may be no incentive to save and to spend wisely. Old age can creep up unaware and when those much needed retirement dividend checks are most needed, they’ll be noticeably absent. How can this be prevented?
John Hancock Mutual Funds divides investment goals into three types: Short-term goals, mid-term goals and long term goals. Short term means those items when one is first starting out, possibly after college, when that first important job with adequate pay checks start coming in. On that list will be possibly a wedding, travel expenses and furniture for that first apartment.
In midlife goals change: These will be for house payments, house renovations, vacation homes, a new business venture or whatever. Twenty or thirty later the needs are different. Money will be used for retirement, to pass inheritances on to children, charity, or for those expensive health needs and medicines that Medicare won’t cover.
You don’t wait until that certain age before you begin considering how these are to be financed, but you keep the necessity for all of them in the back of your mind. First things first and in logical order and as you age, your goals will likely change right along with you. What once was thought to be the rich life will begin, by the time you are fifty, to lose some of its luster. You adapt and rearrange your priorities.
Goal planning must be flexible. It’s a plan you put together on how to spend money even when you don’t have the money to spend. Neither does goal planning mean that ten or 20 years hence you will have arrived at a certain plateau of a living standard and will have checked off what you’ve accomplished or haven’t accomplished.
Instead it means you’ve followed your goals wisely but loosely. Your spending habits may have been those bordering on the frugal, but that’s your nature and because of it you and your family are comfortable but are not ostentatious and pretentious. Expect to continue on in this manner and by the time retirement arrives, you’ll be ready for that too. All of this will have happened because earlier you set goals of how to spend your money. You knew then and you know now that money cannot cure all of life’s ills, but it helps.