Investing for Beginners: How to Build Financial Habits

Receiving your first stipend or salary is an exciting step towards financial independence. As you start earning your own money, you also gain more freedom to decide how to manage it, from covering everyday expenses to saving and planning for your future.

While enjoying some of what you earn is important, this is also a good time to start building financial habits that can support your future. Learning how to save and understanding the basics of investing from a young age can help you work towards your financial goals over time.

When it comes to investing for beginners, the key is not how much you start with. It is developing the discipline to get started and remain consistent.

Investing for beginners – Key takeaways

• Start building a saving habit as soon as you begin earning.
• Set aside part of your stipend or salary before spending on non-essentials.
• Build savings for short-term needs and unexpected expenses before deciding how much you can invest.
• Starting to invest when you are young gives you a longer investment timeframe.
• Investments involve risk, so understand what you are investing in and consider your goals and risk tolerance.
• You do not need to be an investment expert to start learning about your options.

Start with the habit of saving

When you receive your stipend or first salary, it can be tempting to think about everything you can finally afford. But getting into the habit of putting some money aside first can make managing your finances easier.

As Warren Buffett said, “Do not save what is left after spending, but spend what is left after saving.” This simple principle highlights the importance of making saving a priority rather than an afterthought.

Start with an amount that feels realistic. Rather than focusing on a particular percentage, look at your income and essential expenses and decide what you can comfortably save each month.

Consider treating your savings like any other regular expense. Set the money aside when you get paid instead of waiting to see what remains at the end of the month.

Over time, even relatively small amounts can help you build a financial buffer for unexpected costs and prepare for bigger goals, from travelling and further education to buying your first car or eventually purchasing a home.

When should you start investing?

Once you have started building your savings, you might begin thinking about investing some of the money you will not need in the short term.

Starting young gives you the advantage of time, allowing you to work towards your financial goals over a longer period. Having a longer timeframe means you may be able to reach your financial goals by setting aside smaller amounts regularly, rather than needing to save or invest larger sums later in life.

Before deciding how much to save or invest, it is important to identify your financial goals and when you want to achieve them. These can be divided into:

• Short-term goals: Saving for something you plan to do soon, such as a summer holiday or a new laptop.
• Medium-term goals: Putting money aside for bigger milestones, such as a deposit on your first home within the next five years.
• Long-term goals: Planning for your future, such as building retirement savings or supplementing your pension.

Understanding your goals and timeframe can help you decide whether saving or investing is more appropriate for your needs.

However, investing is different from saving. All investments involve some degree of risk, and their value can rise or fall. Before making an investment decision, it is important to understand the risk and potential reward profile of the investment and consider whether it aligns with your financial goals, timeframe and tolerance for risk.

What can young investors in Malta consider?

Investing does not have to mean choosing individual shares or making investment decisions on your own. There are different investment services available depending on how much guidance and involvement you prefer.

Through APS Investments, you can choose between an advisory service, where a professional Investment Advisor helps you identify investments suited to your financial goals and risk tolerance, or an execution-only service, where you make your own investment decisions and the Bank carries out the transactions on your behalf.

APS Investments offers a range of investment options, including local and foreign bonds and shares, Exchange-Traded Funds (ETFs), mutual funds, foreign currencies, insurance policies and pension plans.

You can also consider structured savings plans, which allow you to invest a set amount regularly, such as every month. This approach helps you build investment discipline and spread your investments over time, potentially reducing the impact of short-term market volatility, although it does not eliminate investment risk.

Whether you prefer professional guidance or feel confident choosing your own investments, the important thing is to understand your options and choose an approach that aligns with your financial goals, knowledge and attitude towards risk.

Diversification can help spread investment risk, although it cannot eliminate risk altogether.

From your first stipend to your first salary

As your income changes, your financial habits can grow with you.

You might start by saving a small amount from your student stipend. When you take on a part-time job, you may be able to increase it. Once you receive your first full-time salary, you can review your budget again and decide whether you can put more towards savings and longer-term investments.

The important thing is consistency. Your financial plan does not have to stay the same forever. As your income, expenses and goals change, you can adjust how much you save and invest.

APS Bank recommends reviewing financial plans regularly as personal circumstances and the wider economic environment change.

Start building your financial future

You do not need to know everything about financial markets before you start thinking about investing. What matters is learning, asking questions and understanding the choices available to you.

Meet one of the APS Investment Advisors to discuss your financial situation, goals and risk appetite and understand suitable investment options. APS Bank provides a complimentary financial planning service, and you can start small and increase your investments when your circumstances allow.

Ready to explore your investment options? Book an appointment with APS Investments to discuss your financial goals and learn more about the options available to you.

FAQs

How can I start saving from my first salary?

Start by looking at your income and essential monthly expenses. Decide on an amount you can realistically set aside each month and consider transferring it to savings as soon as you are paid.

Should I save or invest my money?

Saving and investing can serve different purposes. Savings can be useful for short-term needs and unexpected expenses, while investing is generally better suited to money you can put aside for longer-term goals. Investments also involve risk.

Can I start investing with a small amount of money?

Yes, you can start investing with as little as €50, depending on the investment product. You can begin with a small amount and gradually increase your investments as your financial circumstances allow. Minimum investment amounts and conditions vary between products.

What investment options are available in Malta?

Investment options include bonds, shares, ETFs and investment funds, among others. APS Investments offers a range of local and international investment products from a carefully selected range of investment partners, helping you explore options that suit your financial goals and risk tolerance.

Is investing risky?

Yes. All investments carry some level of risk, and their value can fall as well as rise. Although APS Investments carefully researches and selects investment products, risks still exist and vary depending on the product. It is therefore important to discuss the potential risks, features and benefits with your Investment Advisor to ensure you understand the investment and how it aligns with your financial goals and risk tolerance.

Do I need financial knowledge to start investing?

You should understand what you are investing in and the risks involved, but you do not have to navigate the process alone. Learning the basics and speaking to a qualified investment professional can help you make more informed decisions.

Approved and issued by APS Bank plc, APS Centre, Tower Street, B’Kara BKR 4012. APS Bank plc is regulated by the Malta Financial Services Authority to carry out Investment Services activities under the Investment Services Act 1994. The Bank is a participant in the Investor Compensation Scheme as established under the law of Malta. Terms and conditions apply and are available on Terms and Conditions – APS Bank.  If you invest in any Product, you may lose some or all of the money you invest.  The value of any investment may go down as well as up. The income you get from any investment may go down as well as up. This information shall not be deemed as investment, tax or any other form of professional advice. You should consult your independent legal, investment or other advisors to ensure that any decision you make is suitable for you with regards to your specific circumstances and financial situation.