Making high-risk investments can be a scary prospect for beginners. Usually, you have little to spend and therefore you must exercise extreme caution regarding what you direct your money towards. If you’ve just joined the world of income earning and are well on your way to your financial goals, the next step is learning how to grow your savings by investing in the right projects.

Before you go into investment, ensure your saving habits are consistent and that you have built your emergency fund to an acceptable level (about 6 months worth of savings if setting aside 20% of monthly income). You should take small steps so that you build your personal financial discipline and skills before venturing into the world of investment.

Below, we offer a few tips that will keep you from collapse before you set your foot in the risky waters of investment, to ensure your income is not lost in miscalculated risks and/or careless spending.

  1. Where possible, avoid consumer debt

Do not take a loan except when it’s absolutely necessary, and only borrow the exact amount that you need, nothing more. It’s very easy to fall into the hole of never-ending debt, especially if you already have student loans from your campus days, which will take a while to pay off.

Now, remember that loans do not only refer to amounts you borrow from moneylenders and/or credit institutions. The most common entrapment for young people is taking up post-paid cell phone lines and of course those appealing credit cards. These are most commonly defaulted on among the new income earners.

If you own a credit card, try to limit your spending to the items that are absolutely necessary. In addition, ensure that you make your payments in full and on time each month in order to avoid a negative entry on your credit score report. Remember, for some credit card providers, the interest charged on defaulting can be as high as 24% per annum.

Already, you probably defaulted for lack of funds, which means that every subsequent month the amount grows exponentially in addition to the original amount owed. That’s how people end up paying debts for the rest of their lives.

  1. Be insured

Insurance seems like a waste of money, especially for young people who are in perfect health and cannot fathom things like death or sickness coming to them. However, insurance is a good investment to have 10 years down the road. As a low-risk insured person, you can secure insurance much cheaper now than you would when you need it a few years down the line.

Not only is it cheaper, but insurance protects you and your loved ones from the uncertainties of life. Everybody must have at least medical insurance, so if your employer doesn’t provide it for you and your family, this is where you need to begin. Also, take up whole-life rather than investment-linked insurance.

Next, you can consider accident cover and/or life cover in order to protect your family if you are the main breadwinner of the family. You are not immune from sickness and other debilitating events, so ensure you are adequately shielded.

  1. Check your credit score

A study was conducted by Nanyang Technological University (NTU) Singapore, featuring 600 respondents between ages 18 and 25 and drawn from 10 institutions of higher learning. Of these, 90% of the respondents didn’t know anything about credit reports.

A credit report is a personal account of a person’s credit history which lenders use to determine whether you are a good candidate to receive credit from them. If you have a bad report, you reduce your chances of getting a loan from a lender, or you will get the loan at a higher interest rate than people with better credit reports.

Credit reports are very easily ruined, but are very hard to repair, therefore as soon as you start having financial obligations in your name, you should ensure that you are meeting them. Just having a single late payment for a credit card debt on your report will spoil your credit score for seven years.

Other payments that could damage your credit score include utility bills, post-paid service bills and of course loan/debt repayments. Not only does discipline in meeting these obligations keep you out of the red financially, it will help you maintain your credit score at its highest, because you never know when you will need to take a loan in future.

Check your credit score quarterly to ensure that it reflects the truth of your financial situation. This will help you portray a good credit score, which endears you to lenders, employers and other interested parties.


Once you have these aspects taken care of, you can visit a financial advisor and go over different investment products for the amount you have to set aside and the returns on each. In the beginning, avoid high-risk investments like directly investing in shares. Instead, you can go into bonds and/or balanced funds where you have a smaller guaranteed return.

As your income grows, you may carefully select companies in which to invest directly after thorough research, or invest through an equity fund from a reputable investment firm.