Investing is one of those topics that sends people running for the hills at the mere mention of the word. And it’s no wonder! Schools don’t teach us that investing is a critical ingredient to building wealth —and they certainly don’t teach us how to do it. Well, let me fill you in on a little secret I’ve picked up over the past few years: investing is super important if you want to be 100% financially independent one day. And, achieving this independence doesn’t have to be that complicated or intimidating. Read on to see how I break down investing for beginners in ways anyone can understand.

Why is investing important?

Let’s start with the bad news: it’s not enough to just save money. If you really want to grow your net worth, investing is a must. Consider this: the average interest rate on a savings account is below 1%, while the historic average return of the stock market is 10% per year. If that tidbit wasn’t enough to convince you, let me introduce Sallie Krawcheck to the conversation.

Among other highlights, Sallie is a former Wall Street CEO, financial feminist, Founder of Ellevest (a digital investing platform for women), and a total #girlboss. According to Sallie, “cash may feel like zero risk, but it also has zero potential to grow as stocks do over time. And…with inflation, the purchasing power of that cash will decline over time.” Let’s break that down. Inflation (general price increases) grows at about 3% per year. That means prices are increasing faster than your savings are growing. And you’ve worked way too hard for that!

Should I start investing now?

The earlier you start investing, the more time your money has to compound and grow. Sallie says, “the best place to start investing is in a 401(k) retirement account, if your employer offers one. The tax advantage will help your money grow faster, and if your employer provides a match, all the better! (That’s free money.)”

Before you start investing outside of retirement accounts, it’s important to lay the groundwork for healthy finances. First, make sure you have an emergency savings account to give you cushion in case you take a pay cut or face an unexpected expense. Then, make sure you have paid off all of your high-interest debt (like credit cards). That’s because the interest you’re paying is probably higher than your investing returns will be.

If you are debt-free and have emergency savings, then the time to start investing is NOW!

What should I invest in?

It’s important to have a well-diversified portfolio when it comes to long-term investing. But the composition of that portfolio really depends on your time horizon. If you’re in your 20s or 30s and saving for retirement, you can put more money into low-cost index funds that track the stock market. These are just baskets of stocks that give you diversity and track a broader index. These assets will have short-term fluctuations, but that shouldn’t matter if you’re not touching the money for decades.

If you’re 50-something and retiring with a shorter timeframe, your investments should be weighted toward bonds. Bonds are loans made to corporate or government entities. They have lower return expectations, but they are more stable than stocks.

If you’re saving up for a short-term purchase less than a few years away—like a wedding or a house—I wouldn’t invest that cash at all. Instead, stash it into a high-yield savings account that you can access whenever you need it, with zero risk. The last thing you need is for the market to dip right before your down payment is due, so stay away from the stock market on this one.

How do I start investing?

There are countless options out there, but one investment platform stands out as a solution built for women. Plus, it was started by none other than Sallie Krawcheck herself: Ellevest.  Ellevest is an online investment platform that makes investing simple and approachable for women. Sallie has harnessed the recent momentum in the movement toward gender equality and brought it to the investing landscape with this latest venture.

Here’s how Ellevest works. First, you’ll share a little bit about yourself and your life goals. Then, Ellevest will suggest a personalized, diversified investment portfolio for each of your goals. The platform will execute your strategy for you and even maintain it over time. Because who has time for that? All you have to do is sit back, relax, and let your money work for you.

Happy investing!

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