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Resources > Investing for Children > Best Investment for Young Adults—Effective Strategies for Long-Term Success

Best Investment for Young Adults—Effective Strategies for Long-Term Success

Start Building Your Child’s Credit

While investing has always been a popular way to build wealth, research shows that Gen Z has more investors than the previous generations and that they’re more likely to take risks with their investments. Young adulthood is a great time to start investing since time is on your side, allowing your funds to accumulate and giving you the space to recover from risky investments if your plan falls through.

In this guide, we’ll introduce you to the best investments for young adults, provide insightful investing tips, and show you where to invest your money to ensure a bright financial future.

Best Investing Tips for Young Adults

Before you start investing, it’s a smart financial move to pay off any debt you may have and create an emergency fund that can cover at least three to six months of expenses. After that, you can start considering your investment options. Here’s the best investment advice for young adults who are only getting started:

  1. Set investment goals
  2. Assess your risk tolerance
  3. See a financial advisor
  4. Diversify your investments

Set Investment Goals

The way you invest your money depends mainly on your investment goals—short-term and long-term goals require different investment accounts and strategies. For example, if your goal is to save enough to retire when you’re 60, you may consider opening a retirement account. However, if you want to save for a short-term goal like an expensive vacation you want to afford in two years, certificates of deposit (CDs) may be a better choice.

Assess Your Risk Tolerance

You should only start investing once you’ve carefully assessed your risk tolerance by considering how you’d react if you lost money on your investments. There are two investing options based on your risk tolerance:

  1. High-risk investments—Investments like stocks are more volatile because they depend on the performance of the company whose shares you bought. If the company performs well, you can get a high return on your investment, but if it performs poorly, you can lose money. Either way, these investments can be a good choice when you’re a young adult since you’ll have plenty of time to make up for potential losses and accumulate wealth even if the stock value increases
  2. Low-risk investments—Investments like CDs and money market accounts (MMAs) provide a guaranteed return, but the earnings are significantly lower than what you’d get if you opted for high-risk investments. This makes low-risk investments a better fit for short-term goals since you’re not likely to make large sums of money this way

See a Financial Advisor

If you can’t decide whether you’d rather make low-risk or high-risk investments, a financial advisor can help you figure out your ideal investment style. They can also help you set savings goals and choose an investment account that best meets your requirements. Plus, they’ll stir your investments in the right direction to help you avoid mistakes and maximize earnings.

Diversify Your Investments

Instead of putting all your funds toward a single investment, you should make multiple investments of diverse sizes and across various industries. This way, you’re not putting all your eggs in one basket—you can still earn from your other investments if one of them loses value. Meanwhile, if you tie up all your funds in a single investment, you risk losing all your money in case it performs poorly.

Best Investment Accounts for Young Adults

If you’re starting your investing journey as a young adult, you’ll have more investment account options than you would as a teenager. This is because anyone older than 18 (or 21 in some states) is allowed to open an investment or savings account in their own name instead of getting a custodial account with the help of their parent or guardian. Here are the most popular types of investment accounts for young adults you can choose from:

  1. Tax-deferred accounts
  2. Roth IRAs
  3. Taxable accounts

Tax-Deferred Accounts

While saving for retirement may not be your top priority, investing in a 401(k) as a young adult gives you plenty of time to accumulate funds. If you’re employed, 401(k) retirement plans allow your contributions to grow tax-free, but you must invest the money you earn from your job. Many employers offer these plans as a part of their benefits package and contribute a portion of your salary to your 401(k). The contributions can be:

  • Pre-tax—Your contributions are tax-deferred, but you’ll have to pay taxes when you withdraw funds during your retirement
  • Post-tax—Your contributions grow tax-free, and you won’t have to pay taxes when making withdrawals during retirement

In both cases, you can’t withdraw the money unless you’re retired. Some plans have contribution limits, but you can start with smaller contributions and increase them as your career progresses.

Roth IRAs

A Roth IRA is an individual retirement account you contribute to using after-tax dollars, which means you’ll be paying taxes on the money you invest so that your future withdrawals are tax-free. You can withdraw your contributions and earnings from this account after you reach the age of 59½. However, if you want to use the funds you’ve collected for college-related expenses, you can also make withdrawals earlier without any penalties as long as you’ve funded the account for at least five years.

Taxable Accounts

If you open a taxable account, your earnings and interest will be taxed each year. However, these accounts allow you more freedom when it comes to accessing your funds and using them for anything that benefits you without worrying about penalties. Two types of popular taxable accounts include:

  1. Brokerage accounts—When you open a brokerage account, you deposit money into the account, and the brokerage firm that holds the account transacts your funds toward any investment you choose, such as bonds, stocks, or EFTs
  2. Certificates of deposit (CDs)—These work like savings accounts, but they include a higher interest rate since CDs require you to leave the money untouched for an agreed-upon period. During that period, the account pays a fixed interest rate on money held

Best Investment Options for Young Adults

After assessing your risk tolerance and opening an investment account, you can explore the following investment for young adults:

  • Stocks—Buying stocks means becoming a shareholder in a publicly traded company, which allows you to sell your share and make a decent amount of money if the company’s value increases. However, if the value decreases, you may lose money
  • Bonds—These are issued by corporations or governments, and they essentially involve making a loan to the bond issuer that agrees to pay the money back with interest in a certain period
  • Exchange-traded funds (ETFs)—Investing in ETFs means putting your money toward pooled investments like stocks, bonds, and various assets. ETFs track a specific market index like the S&P 500 and are bought and sold on a stock exchange
  • Mutual funds—Similar to ETFs, mutual funds let you invest in multiple stocks and assets simultaneously. Unlike ETFs, they’re actively managed by a fund manager who makes investment-related decisions on your behalf, and trades are only made once a day

Get the Most Out of Investing for Young Adults With Credit Building Services

While credit building services may not be a traditional investing option, they can help you secure rental housing, obtain financing for a vehicle, or get better job opportunities by establishing a strong credit score.

Investing in stocks, bonds, and similar options can help you earn and save a substantial amount of money, but a good credit history is essential for securing your financial future. If your savings and investment earnings aren’t enough to cover larger expenses like college costs or a downpayment for a house, you may need to get a loan—and a good credit score can help make sure you get approved.

A great way to start building credit as a young adult is to rely on services like those offered by FreeKick. This provider assists minors and young adults in establishing a strong credit history with their parents’ help from the age of 13.

FreeKick—Premium Credit Building and ID Protection

Provided by Austin Capital Bank, FreeKick is a combination of an FDIC-insured deposit account and parent-sponsored credit building services for young adults and minors between the ages of 13 and 25. The platform also provides a comprehensive set of identity monitoring and protection features for the whole family, covering up to two adult parents and six children.

Start Building Credit Early With FreeKick

Starting your credit building journey early can help you potentially save over $200,000 during your lifetime by making you eligible for loans with more beneficial terms and interest rates. 

FreeKick lets you build a credit history with your parents’ help as early as the age of 13. Here’s how to get started:

  1. Create an Account—With your parents’ help, go to FreeKick.bank and choose a plan that best fits your family’s needs and budget
  2. Set It and Forget It—As soon as the account is activated, FreeKick automatically starts building your credit over the next 12 months
  3. Keep Growing—When the initial 12-month period ends, you can either renew the account and keep building credit or close it and get a refund of your initial deposit

Keep Your Identity Protected With FreeKick

Alarming data shows that a child’s identity is stolen every 30 seconds, while around one in three Americans have experienced some form of identity theft. For this reason, protecting your investment account from ID theft is crucial for keeping your investments safe.

To help ensure your identity is protected, FreeKick offers identity monitoring and protection features for both adults and minors. Here’s what the service includes:

Services for Adult Children and ParentsServices for Minor Children
Credit profile monitoring
SSN monitoring
Dark web monitoring for personal information
Up to $1 million identity theft insurance
Full-service white-glove concierge credit restoration
Lost wallet protection
Court records monitoring
Change of address monitoring
Non-credit (Payday) loan monitoring
Free FICO® Score monthly
FICO® Score factors
Experian credit report monthly
Credit profile monitoring
SSN monitoring
Dark web monitoring for children’s personal information
Up to $1 million identity theft insurance
Full-service white-glove concierge credit restoration
Sex offender monitoring—based on sponsor parent’s address

FreeKick Pricing

Regardless of your family’s budget, FreeKick has a plan that matches your needs. Both available plans are FDIC-insured up to $250,000. Find more details in the table below:

FDIC-Insured Deposit AmountPlan Fee
$3,000$0 (Free)
No deposit$149/year

Kickstart your credit building journey early and protect yourself and your family from identity theft—sign up for FreeKick today.

Freekick provides a double dose of financial empowerment and security for your whole family. It helps teens and young adults build strong credit profiles and offers identity motoring for up to two adult parents and six children under 25.

Freekick: ID Protection & Credit Building

Protect Your Family’s Identities
Safeguard up to 2 parents & 6 children
Build Your Child’s Credit
Build credit for your children ages 13-25. Good credit can save them $200,000 over their life!
Pay $0 A Year
Make a one-time deposit of $2,500 or pay $149/year with no deposit
Powered by Austin Capital Bank
FreeKick is a combination of a FDIC-insured deposit account, credit building, & identity monitoring services

Get 10% off on the first 3 monthly payments

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