Saving & Investing
Saving is keeping money safe. Investing is putting it to work. Most people in their 20s should do both — and starting early matters way more than starting big.
Build the floor first
Before investing, stash 3-6 months of essential expenses in a high-yield savings account (HYSA) earning ~4% — Ally, Marcus, or Wealthfront. This is your emergency fund. Touch it only for actual emergencies.
Then invest with retirement accounts
Tax-advantaged accounts are the cheat code. Use them in this order:
- 401(k) up to your employer match — that's a 100% return on day one.
- Roth IRA — $7,000/year limit, grows tax-free, withdrawals in retirement are tax-free.
- Back to 401(k) up to the annual limit ($23,000 in 2024).
What to actually buy
Boring wins. A target-date fund (e.g. 'Vanguard Target Retirement 2065') or a total-market index fund (VTI, VTSAX, FXAIX) is what most pros recommend for beginners. Don't pick stocks; let the index do the work.
Why time is everything
$200/month invested from age 22 to 65 at 8% average returns becomes ~$840,000. Wait until 32 and it's only ~$370,000. Same monthly amount, less than half the result.
Glossary
- HYSA
- High-Yield Savings Account — ~4% APY vs. 0.01% at big banks.
- Roth IRA
- Retirement account funded with after-tax money. All future growth is tax-free.
- Index fund
- A fund that owns a tiny piece of every company in an index (like the S&P 500).
- Compound interest
- When the interest you earned starts earning its own interest.
Next steps
- Open a HYSA at Ally or Marcus and set up an automatic weekly transfer.
- Check if your job has a 401(k) match — claim every dollar.
- Open a Roth IRA at Fidelity or Schwab — takes 10 minutes.