You’ve graduated high school, started college, and are on your own. In a few short years, you’ll be making more money. Congratulations! This is probably one of the best things about “adulting.”

Most people become aware of investing while in their 20s; especially as they attend/graduate college, get a full-time job, and accrue more money. If you’re reading this, even you are thinking about investing. There are many different opportunities for you to invest in, and you get to decide where to invest. At Saveday, we’ve seen what works and what fails. We can help answer some of the most common questions that new investors have.

Here are the top four questions we hear from new investors, just like you.

• Aggressive of conservative investing? Which is right for me?
• Do I pay off my debt, or invest?
• Can I put off retirement planning, or do I need to start now?
• How long before I start seeing the results of my investments?

Aggressive of Conservative Investing

Young investors are often told, “you can afford to take on more risk because you have time on your side.” This usually means investing in a higher percentage of stock, with a smaller amount in bonds. Even though it sounds logical, many aspects can affect this type of strategy.

Aggressive or high-risk investments are typically reserved for long-term goals; retirement. In this way, the occasional “dips” in the market won’t hurt your chances of paying for things you want short term. The best example of this is the stock market: the value of stock changes daily, with spikes and drops.

While long-term investments are important, investments with lower risk are a great way to save for financial goals that aren’t so far away. Here are some short-term goals that you might want to start saving for.

Emergency fund. In the event of unforeseen circumstances, it’s important to have a backup plan. A safety net of 3 to 6 months spending money will ensure you have time to get back on your feet in the situation of a health, family, or work crisis. This portfolio should have no more than 40% of stocks.

Wedding costs. According to the US Census Bureau, the median age for marriage is 29 for men and 27 for women. If planning your wedding date around stock market trends isn’t your desire, consider opting for a more conservative investment strategy.

Home down payment. According to the New York Times, most Americans purchase their first house at 32 years old. To afford a home at that age, you’ll need to start saving in your 20s. When saving for a financial goal that is so short term and important, the risk of losing your money isn’t worth the potential reward of an aggressive investment.

Saving for these small goals is easy with many of the online resources and savings apps available today. Make sure that you invest in various assets to diversify your savings and offset industry fluctuations.

Do I pay off my debt, or invest?

The right level of risk doesn’t only depend on your age, it is also important to consider the purpose of that money. But, should you even be investing right now? Or, would it be better to take that extra money and focus on repaying your debts?

A 2018 study by Northwestern Mutual shows that millennials have an average of $36,000 in debt, the majority attributed to student loans and credit card debt. Although many people pay off debt as in accrues, that is not the case for everyone. When deciding whether to pay debts or invest, look at what will be the best use of your next dollar.

Here’s an example: “Would it be better to pay a 4.5% mortgage or contribute to my 401(k) to get a 100% employer match?” Mathematically, the 401(k) match may be a smarter move because it yields more than using the same amount of money to pay extra on your mortgage and saving the 4.5%.

• This can get complicated, so use this framework as a way to decide which payments you should prioritize:
• Always make minimum debt payments on time
• Maximize the match on your employer-sponsored retirement plan
• Pay off high-cost debt (5-6% or greater)
• Save for retirement
• Save for other goals (home purchase, college for your kids)

Can I put off retirement planning, or do I need to start now?

What retirement plan is best for you? Should you choose a Roth retirement account (e.g. Roth 401(k), Roth IRA) because you’re in your 20s? Or, do you use a traditional account?

Here’s a simplified overview of Roth and traditional retirement accounts:

• Traditional: Contributions to these accounts are pre-taxed, so the money you save grows tax-deferred until you start taking distributions. This option is better if your current tax rate is higher than your retirement tax rate.
• Roth: These contributions are deducted after tax. Rather than getting a tax break today, all future earnings and withdrawals will be tax-free. If your current tax rate is equal to or lower than your expected retirement rate, select this option.

How long before I start seeing the results of my investments?

People value immediacy—we want to see big results as quickly as possible, but patience is key when it comes to long-term savings. It is common to hear about the “power of compound interest” and how if you save $x for a certain amount of time, your money will grow, and you’ll have more when it’s time to withdraw for retirement. This is great for early motivation, but the truth is the majority of growth on interest won’t happen for a long time. With little in your account to start, growth by interest will be very small.

Even though it may seem far off, your 20s are a crucial time for investing. Whether you’re debating the right level of risk for your goals, weighing paying debts or investing, or choosing the best retirement account, making the right decisions now will help you build a strong financial foundation for the future.