To my knowledge, personal finance and/or investing is still not part of the standard curriculum in high schools across the country(s). You can learn about personal finance in college. However, if you aren’t attending on a full ride, isn’t college and intelligent personal finance an oxymoron?
Perhaps the reason most people aren’t taught personal finance is “they” want to generally keep folks a part of the larger system that keeps the machine moving. That conversation is for another blog if you’d like to bring with you your tin foil hat.
Let’s look at 5 types of investments that make money with your money.
I BondsI Bonds (let’s call them iBonds because we’re lazy) are bonds issued by the U.S Treasury. In a nutshell, you’re lending money to the U.S government and they’re paying you back the interest.
Why it’s a good passive investment:
- Fixed interest (5.27% ! at the time of this writing)
- Inflation-adjusted rate of return
- Low risk
- They are also exempt from state and local taxes
Drawbacks:
- You have to wait a year to cash them out (technically 15 months - Anything cashed out in less than 5 years and you lose the last 3 months of interest.)
- $10,000 limit
Bonus: The $10k limit is per entity. Your spouse can buy one, or under certain circumstances (and states), you can purchase one through your business.You can purchase iBonds directly from the official website of the US gov:https://www.treasurydirect.gov/savings-bonds/i-bonds/High-Yield Savings Account A high-yield savings account is the easiest point of entry into the world of Your Money Making Money while at the same time not taking on any risk. Most accounts can be opened online, free, within minutes and there are no fees attached to most of these. At the time of this writing, interest rates are hovering around 4%. Which means, you are getting payments sent to you from interest, monthly if you choose, just by having your money sit in a risk free account. Linking your direct deposit or setting up automatic transfers to this savings account is simple and in my opinion a crucial step in becoming financially healthy when you’re just starting out. Accounts are FDIC insured and typically each will allow a maximum of $250,000. Investment Apps Fundrise, Betterment, Wealthfront, and Robinhood are a few of the popular mobile apps people use to invest their money.Betterment and Wealthfront offer similar services. The Betterment app allows you to deposit as little as $10 into a self-managing portfolio of investment assets. This app is what is called a robo-advisor, where algorithms are managing your portfolio for you. Fundrise is a real estate investment platform that allows individuals to invest in private real estate assets through a variety of investment vehicles. The platform uses technology to give investors access to a diverse range of real estate assets, including commercial, residential, and mixed-use properties.Through Fundrise, investors can access real estate investments that were previously only available to institutional investors or high net worth individuals, with lower minimum investments and fees. Fundrise offers a simplified and user-friendly investment process, making it easy for individuals to invest in real estate without the hassle of traditional real estate investing.
Robinhood allows users to invest in stocks, ETFs, options, and cryptocurrencies with no commission fees. The platform offers a simple and intuitive mobile app that allows users to easily manage their investments, track their portfolio performance, and execute trades.There are better broker services out there, but I’ve found that the simplicity of the app is a great vehicle into the world of investing in stocks.Certificate of DepositA Certificate of Deposit or CD is a savings account that pays a fixed interest rate over a fixed amount of time. It differs from a high-yield savings account in that you pay a penalty fee if you withdraw your money before the CD “matures” or reaches the end of the fixed term. Typically, CDs offer a higher interest payment rate than high-yield savings. They are less liquid in nature as it’s recommended to keep your money in one the full term and avoid early withdrawal penalties. Capital One at the time of this writing is offering an 11-month CD that pays 5% interest. Marcus by Goldman Sachs is currently offering a special for a 10-month CD at 5.05%. Dividend Paying Stocks***YET ANOTHER DISCLAIMER THAT THIS BLOG DOES NOT OFFER FINANCIAL ADVICEA lot of profitable companies share a portion of their profits with their shareholders in the form of dividends. These dividends can be paid out monthly, quarterly, semi-annually, or annually and can provide a steady stream of passive income.As a bonus, these stocks have the potential to increase in value. As the company grows and becomes more profitable, its stock value and dividend size may increase, leading to capital gains and additional income for the investor. One company I invest in is Realty Income Corp (NYSE: O). They mostly own single-tenant, triple-net-leased retail properties. They have a solid history of increasing stock price and dividend payouts.
Again, like most things related to the stock market requires risk and IMO should only be used as a means to increase wealth, not create it. If you’re just starting to build capital and can’t afford to lose it, your best bet might not be dumping money into Wallstreet. However, by searching for stocks with the longest history of dividends, you’ll find there are some winners out there. Want to take a peek inside the world of buying/selling stocks? I use Robinhood. You can use my link and we both get a free stock. Woohoo!