College students are usually (and understandably) more concerned about debt than about investing, but every once in awhile we hear from one who wants to get a head start. And we cheer.

That’s because investments made when you’re young–in your teens, 20s and 30s–have decades to grow and compound (that’s when your returns earn returns). There’s nothing like time to transfer even small sums into sizeable fortunes.

Simply put, starting to invest while you’re young is one of the easiest ways to get rich.

For example: Leah, a college sophomore, recently wrote to ask advice on how to invest. She has $5,000 saved up.

If she invested that $5,000 mostly in stocks or stock mutual funds, chances are excellent that she could earn an average annual return of 8% or better over the coming decades. That means her $5,000 nest egg would be worth more than $100,000 by the time she retired.

Where to put the money? The answer: somewhere cheap. No investor wants to pay unnecessary fees and expenses, but the damage multiplies the longer your money is invested. If Leah chose investments with expenses that trimmed just 1% of her returns each year, that $5,000 would grow to $71,000–or about 30% less.

So: look for low-cost investments like index mutual funds. And to make your financial life even easier, consider a target date maturity fund such as Vanguard Retirement 2050 or T. Rowe Price Retirement 2050.

Target date funds do all the heavy lifting for you. Not only do they pick the investments and the asset allocation (how your money is divided among stocks, bonds and cash), but they gradually adjust the portfolios’ investment risk as you age. (The numbers refer to the year or decade in which you plan to retire…Leah’s got about 40 years in the workforce ahead of her, so 2050 would be around the time she will probably quit work. If she were 10 years older, she might pick a 2040 fund).

Just about every mutual fund company and brokerage offers target date maturity funds. So do most 401(k)s. They’re a great way to get started with investing and to simplify your finances.

Here’s to a rich life, Leah!

TAGS: Investing, retirement, target date maturity funds, Women and Money, young investors

My friend Susan Picascia and I wrote an article that appeared in the June issue of Hemisphere’s magazine entitled “Creating a Workplace Legacy.”  Our premise is that wherever you land about five years before you plan to retire is most likely where you’re going to remain.  Companies often marginalize employees in what we call the “final five” (particularly women!) but you can revitalize your career by thinking about the legacy you want to leave behind.  If you’re interested in seeing the entire article, e-mail me at info@drloisfrankel.com, but here are few tips for how you can remain productive and fulfilled during the last few years of employment:

• Take more risks.  At this stage of your career you have little to lose.  You’ve proven yourself, you have experience, and you can make a difference.  Be the voice of dissent when it’s clear the company is headed in a potentially disasterous direction or say the things everyone else is thinking but are afraid to say.
• Create new systems or processes.   You’ve been so busy doing your entire career you may have never taken the time to step back and see how things could be done more efficiently or cost effectively.   Now’s your chance to leave a lasting legacy based on your unique expertise and experience.
• Influence the vision, values, and goals of your company.  Seize opportunities to illuminate how the company can be a better member of the community, treat its staff better, or raise the bar for how business in your industry is done.  Comments like “I like this new idea.  Let’s think about how it will impact our community” or “If we really want to retain talent let’s look at the developmental opportunities we provide to all employees, not just ones we hand pick” can go a long way toward leaving a legacy of which you can be proud.

TAGS: making a difference, retirement, Women and Aging, workplace legacy