Accounting, Clutch Report

Smart Money Tips for Investment Beginners

January 27, 2021

by Anna Peck

Senior SEO Specialist at

Despite the COVID-19 pandemic’s negative impact on the economy, over half of millennials felt confident in their money-making decisions. While confidence is important, clear guidance on where younger generations should invest their money is necessary for planning for the future. 

Getting motivated to invest your money wisely is hard when the new iPhone or pair of Jordans are calling your name.

Investing is more than just putting part of your paycheck into your savings each month. Additional strategies are crucial in establishing a sense of financial security early in life.

While 2020 wasn’t the best year for the stock market, there has been a growing interest in investing, especially amongst younger generations. 

Clutch’s recent money management survey asked 501 Americans about their investment habits.

Our data reveals that while younger generations feel comfortable dealing with their money, they’re not sure where to turn when it comes to making smart investment decisions. 

The survey found that while 88% of millennials already invest their money, only 55% are confident in their money-making decisions. 

55% of millennials

While the desire to invest is clear, some millennials might need a bit of guidance on where to start. As the new year begins, we examined strategies for investing that will help beginners start 2021 right. 

Our Findings

  • Eighty-eight percent (88%) of millennials invest their money, while only 55% of millennials are confident in their money management skills.
  • Americans (37%) use traditional savings accounts to invest their money. 
  • Eighty-two percent (82%) of Americans use credit cards for their purchases. Nine percent (9%) of millennials found that the most common mistake with their money was using credit cards for unauthorized purchases. 
  • Only 6% of Americans considered paying off their debt a high-priority for saving and investing in the last few months.
  • Over the last few months, 83% of Americans found themselves tracking their expenses, showing their commitment to saving.
  • Over 40% of Americans invest in 401(k) plans. Millennials are investing in numerous accounts that all benefit their futures, including 401(k) plans (53%), traditional or Roth IRAs (29%), stocks (25%), and mutual funds (14%).
  • 45% of millennials are investing and saving for retirement, preparing for their futures in an unprecedented time.

Strategies for Investing

  1. Start a High-Yield Savings Account
  2. Use Rewards Credit Card Programs
  3. Make Your Way Out of Debt
  4. Consider Your Investment Options
  5. Plan for the Future

1. Start a High-Yield Savings Account

High-yield savings accounts help grow your money faster than a standard savings account. 

While 37% of Americans use traditional savings accounts for their investments, younger generations could benefit from a high-yield saving account that rewards users with a higher interest rate. 

Basically, high-yield savings accounts grow your money while it sits in your account. 

“People who want to grow their money for an emergency fund, vacation, or a down payment on their dream house, might want to increase their savings with less risk in a high-yield savings account,” said Ben Reynolds, CEO & Founder of Sure Dividend, a financial resource for individual investors. 

If you want easy access to your savings while receiving a great return, these accounts might be your best bet. But, before signing up with your bank, do your own research to find what best fits your needs and situation.

When looking for a high-yield savings account, consider these questions:

  • Initial deposit: How much money is required to open the account?
  • Minimum balance: How much do you have to save to keep the account going?
  • Fees: Are there any hidden fees on the account?
  • Access: How easily can you withdraw money, if needed?

Chris Abrams, founder of Abrams Insurance Solutions, an insurance and investment agency, encourages investors to take advantage of high-yield savings accounts, but not as their only investment option.

“While I recommend still having a savings account through your bank, high-yield accounts can help you build your savings while protecting your money from the risks of other investments,” said Abrams. 

High-yield accounts are a simple and risk-free way to help investment beginners grow their money faster, but it is important to consider hidden factors and other growth opportunities. 

2. Use Rewards Credit Card Programs 

If you’re working on building your credit, you’ve been told and have experience with how tricky credit cards can be. You’ve also been warned about the dangers of excessive credit card spending. 

Nearly 1 in 10 millennials (9%)  admitted that using their credit cards for unaffordable purchases was their most common money mistake in the last few months.

9% credit cards

For people new to credit card programs, it’s important to be aware of interest rates. 

“Credit cards often give spenders a false sense of security,” said Nicole Scanlon, Managing Director at Olson Wealth Group, a financial guidance company. “With average interest rates on most credit cards as high as 17%, that is a huge increase to the overall bill that can add up in the long run.” 

Each type of credit card offers different rewards plans and benefits. 

With 82% of Americans using credit cards, it is important for beginners to find the rewards and benefits that work best for them. 

Reward credit cards come in two categories: cash-back and travel cards:

  • Cash-back cards pay back a percentage of each transaction.
  • Travel rewards cards give users points of miles with each dollar spent. 

With a majority of rewards cards, consumers can see their account balance and accumulated earnings on each statement. From there, they can make the decision on whether they should redeem them.

“Credit card rewards can be useful, but it’s important to pick the right kind of reward,” said Ksenia Yudina, CEO of UNest, a consumer financial app. “Travel points make a lot less sense for most lower income families than cash back rewards.” 

“Credit card rewards can be useful, but it’s important to pick the right kind of reward.”

Argenis Bouza-Portal, the founder of The Affluent Millennial, a financial media organization, takes advantage of two rewards credit card programs.

Through these cards, she receives different benefits, including travel fare credits, TSA pre-check, UberEats credits, and credits toward subscription services like Netflix. 

While it seems that credit cards open up a lot of opportunities, they shouldn’t be used for impulse buys.

“Rewards credit cards reduce the net cost of purchases you’d make anyway, so they’re useful as long as they’re used responsibly and paid off in full every statement cycle,” said Brian Martucci, a personal finance expert at Money Crashers, a financial guide. 

Rewards programs do have an added benefit for young consumers, but like all credit cards, it is important to stay smart while swiping.

3. Make Your Way Out of Debt

We’re already tackling a never-ending list of debt: student loans, car payments, medical expenses, etc. And then, an unexpected emergency pops up and you can find yourself back at square one. 

One of the first steps to increase your financial security is to pay down your debt. Despite this, only 6% of Americans said that paying off debt was a top priority in the last few months. 

6% of debt

While the coronavirus pandemic has stalled many loan payments and prompted loan forgiveness programs, debt is not something that will magically disappear – or melt. 

The snowball method is a popular reduction strategy that allows users to gain momentum when starting their debt payoff journey. 

“Many people find success paying off their smallest debts first, then building momentum to tackle larger balances,” said Martucci. 

While many Americans tackle their debts using that strategy, some go beyond snowballs and tackle something much larger by using the avalanche method.

“The avalanche method focuses on paying off your higher interest account first,” said Abrams. “This is a great way to reduce the amount of interest you pay and tackle your debt first.” 

Understanding your income should be the first step, regardless of what debt strategy you're using. 

Tracking your expenses is a great way to find where extra money that could go to paying off debt.

In the past couple of months, 83% of Americans tracked their expenses. 

“A lack of tracking your expenses is a one-way ticket to bankruptcy or even debt,” said John Li, co-founder of Fig Loans, a finance lending company. 

Ben Singh, owner of SEEBHomes, a home buyer, said that tracking your expenses encourages people to have healthier financial habits through investing and debt paydowns. 

Paying off debt requires a lot of motivation, especially for younger generations It is something that you’ll have to continually remind yourself of in order to be successful. How will paying off this outstanding debt benefit your future goals?

4. Consider Your Investment Options

To start your investment journey, you must first consider your options. For beginners, this involves figuring out the type of investment account they’ll use. 

“There is no one-size-fits-all approach in investments, but there will be an investment that will be perfect for an individual,” said Paul Sundin, a tax strategist at Emparion, a retirement planning provider.

Over 40% of Americans use a 401(k) for their main investment account.

401k 42%

Millennials use 401(k) plans (53%), traditional or Roth individual retirement accounts (IRAs) (29%), stocks (25%), and mutual funds (14%) for their investment plans. 

If you’re unsure where to turn in 2021, research which option works best for you:


Over half of millennials (53%) invest in 401(k) plans.

401(k) plans are defined-contribution retirement accounts offered by many employers to their own employees. Workers make the contributions to these accounts through payroll deductions. 

“If your employer matches your contribution in your 401(k), that can be free money to take advantage of,” said Reynolds. 

These plans are popular choices for investors because of the flexibility they offer. 

Traditional or Roth Individual Retirement Accounts (IRA)

Nearly 30% of millennials use an IRA as their main investment account.

An IRA is one of the most common retirement accounts – a traditional IRA has tax-deductible contributions, but the withdrawals in retirement are taxable.

There are different types of IRAs, depending on an individual’s situation. Along with the variety of investment options to choose from, there are some tax benefits. 


For Roth IRAs, the contributions are not tax-deductible, but the withdrawals are tax-free. Rules by the IRS make the decision easier for you, depending on eligibility. 


Optimistic about the new year? Stocks might be a good place to start. 

A quarter of millennials invest a portion of their money in stocks. 

A stock is a type of security that gives holders a share of ownership in a company. The stock market can be unpredictable, so stockholders have an added interest in their investments. 

“Allocating your money in stocks and bonds can vary by age,” said Reynolds. “Younger people can invest in more risky stocks since they have more time to make up for any losses.” 

“Younger people can invest in more risky stocks since they have more time to make up for any losses.” 

Keep an eye on trends and news to ensure your company is moving in the right direction.

Mutual Funds

Only 14% of millennials choose a mutual fund for their investments.

A mutual fund follows the same model as stock ownership, but it consists of a portfolio of stocks, bonds, and other securities. These funds are operated by professionals that allocate assets accordingly. 

“After investors have reached their maximum contribution, I recommend that they do so in a balanced portfolio to achieve growth,” said Scanlon. 

It is important to note that mutual funds are an investment and an actual company. When a person is buying stock in an actual company, they’re buying partial ownership of that company. 

To live comfortably, investing is essential. But, the course to take is up to the individual. 

5. Plan for the Future

Time to play fortune teller — thinking ahead is key to any investment strategies. Look inside your crystal ball and see what’s in your future.

Retirement (45%)  is the top reason millennials are investing and saving their money. 

45% retirement

While this might seem outrageous considering retirement is 30–40 years away for this age group, padding a rainy-day fund can ease anxiety, especially during unprecedented economic times

“You can’t comfortably live off social security when you retire,” said Reynolds. “Investing in retirement accounts, the market, or real estate can help you build a substantial amount for expensive medical and living costs after you retire.” 

Millennials have also been impacted by several recessions, so getting a head start isn’t such a bad idea. 

“Money-making skills take time to develop, but if you invest in them, you will never go hungry and always have a way to be financially profitable,” said Li. 

Bouza-Portal encourages beginners to get their feet wet, starting with the smallest sum.

“Remember, your path of investing starts with the first dollar,” said Bouza-Portal. “With time on your side, those who have the ability to invest over decades have the advantage of growing wealth that allows them to enjoy a lifestyle that others can’t afford.” 

Thinking ahead and being confident in your money-making decisions sets you up for investment success. 

Make Your Money Work For You Through Smart Investments

With younger generations gaining more authority with their money, they feel more confident in making decisions but unsure where to start when it comes to long-term investments. 

Investment beginners must think smart and realistically about their money. 

First, they must consider their investment options – whether it is through funds provided by their employers, offerings from their bank, or through an outside resource

It’s also smart to take advantage of what’s available through rewards credit cards and other benefit programs. But, investment beginners must make sure that they’re aware of what’s happening behind the scenes. 

Whether it’s through student loans or other financial setbacks, younger generations should prioritize paying back debt to set up a more stable future. 

Putting these smart money tips into action is only just the beginning of your journey to becoming a financial expert.  

About The Survey

Clutch surveyed 501 Americans in November 2020 to learn about how they spend and manage their money.

50% of respondents identify as male; 37% as female; 13% didn’t identify their gender.

Baby boomers and older make up 30% of respondents; Generation Xers make up 26%; millennials make up 15%, and Generation Z makes up 7%. 22% of respondents didn’t reveal their age.

Respondents are from the Midwest (34%), South (31%), West (24%), and Northeast (12%).

Related Articles More

How Small Businesses Budget
4 Financial Challenges for Small Businesses
Accounting Strategy: Tips to Manage Small Business Finances

Stay Updated With Clutch

Never miss new content. Subscribe to get weekly content roundups – delivered straight to your inbox.