How much savings is recommended before starting investing?

1 Reply

I know that number probably varies greatly between people’s comfort levels and preferences. I’m just curious if there is a commonly recommended amount. I’ve been researching and learning how to get started investing without using my own money, but I still feel like I need to have a good amount of savings. I just don’t want the question of savings to become a reason that I keep putting off getting started. How much would you recommend a newbie have in savings before getting started? Is the number in the $10,000s range? Or $100,000s range? Thanks in advance!

Hi Abigail!

This is a question that I imagine will pull many varied types of responses. I could give you my opinion, but I'm sure you would get a different response from different people you ask.

I would probably first say, it depends on what type of investment(s) your looking to get into. There are many different types, some ranging from very low returns (like a savings account) to the possibility to very high returns and with much higher risk.

The positive thing about this subject as there is a lot of content out there about it and great advice to follow. One thing I would suggest to continue to network with people in the real estate world, financial world, people successful in business, etc. You will start to learn of increased opportunities to invest your money and use your money to generate more money.

Some of the most basic concepts that I personally find super important is to always set aside the largest percentage possible of all your incoming money. You always "pay yourself first" from the money you generate. Per the "Richest Man in Babylon" book, you should be paying yourself a minimum of 10%. If you want to build your wealth and increase your choices with investments and business choices, I would strive for more. You may feel limited at first, but as long as you continue to always pay yourself first, you will experience the effect of opening up your options on using that money to generate more money. 

Personally, all the money I "pay myself" with is money that is ONLY to be used in ventures, products, investments, real estate that will generate more money. This keeps me in the mindset of it never to be used towards personal things that I want. It all goes into separate accounts that I never touch for my day to day expenses or rewards. This action alone will start to build, even if you're not making a whole ton of money. You will quickly find that this one action alone will put you above the majority of people in general financially. 

The other side of this concept is to also take effective action to generate more money immediately. The more money you generate, the more that percentage will build your wealth and investment opportunity.

In terms of WHAT you invest in, this is an entirely different subject, but the most basic thing I would say without getting into a long continuation on it, I would suggest to keep learning and only invest in those things you understand. The higher your understanding gets on what you're investing in, the higher your ability is to make a good decision and know what your risks are. The amount you want to invest in something, in ratio to your total cash available will also change depending on the risk of the investment.

I know with an American Express Personal Savings (High Yield) account, you can earn close to 2% on your money as you continue to let it build, which is fairly good place to start while you continue to let it build and do further research and education on the types of investments available to you.

Good luck!