By Clarky Davis
When it comes to saving money and investing for your future, it’s never too early to start. Investing, though, at any age can be intimidating. You don’t have to be a financial expert to make the wisest investment choices, but you do need to take responsibility for your money and educate yourself.

The best investment decision you can make is to get going when you’re young! If you’re fresh out of school and have started a new job, your top priority should be enrolling in an employer-offered 401(k) plan. Even at age 21, you need to be thinking about your retirement. It’s not how much money you have at this stage, rather its how much time you have to invest and grow.

What’s your 401(k) all about?

A 401(k) allows you to select from several different investment vehicles, usually a choice of mutual funds that offer a mix of stocks, bonds and money market investments. In many cases, you also have the option to purchase the company’s stock.

Just to clarify, a mutual fund brings together monies from thousands of small investors. A mutual fund manager uses that money to purchase stocks, bonds or other financial securities. Your contribution to a mutual fund buys a stake in all its investments.

A stock is a small portion of ownership in a company. A bond is a loan usually to the federal or state government, local municipality or corporation that is paid back on a particular date with interest.

When you first start to invest in your 401(k), your employer will likely offer workshops at your office to help you understand how to invest your money. Take advantage of this opportunity. You will also get a retirement investment kit at this time. Go through this information carefully to help you make the right investment decisions for your lifestyle.

How Should You Spend Your Money?

In addition to saving and investing, it’s also important to be smart about how you spend money. While you’re setting aside money in your 401(k), you also need to set aside funds in a short-term savings account. You’ll want this to support unexpected expenses or life events (like a job loss). Hopefully, this will prevent you from dipping into your growing retirement account.

One of the worst financial moves you can make is withdrawing money from your 401(k). You will be required to pay a 10 percent tax penalty, as well as paying taxes on the balance. As you move up the career ladder and switch jobs, you can roll your current retirement savings into a new employer’s plan or into an Individual Retirement Account.

Buying Stock Outside of 401(k)

If you’re interested in purchasing stock outside of your 401(k) investments, there are two options to consider: a full service or discount broker. The full service broker is the pricier option, as they provide financial planning and advice. The discount brokers depend on the buyer to do their own research and have their own investment strategy for making purchases.

Keep in mind that you don’t want to be swayed into purchasing a stock because it’s being hyped in the media. Do your research. You want to make smart investing decisions.

Clarky Davis is the author of the Debt Diva Blog and the Debt Diva’s 2008 Financial Guide.