my two cents

I Know I Should Invest My Money, But It Makes Me Anxious

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I’ve been saving money bit by bit since my 20s, and now I have about $40,000 in cash (I’m 32). I keep reading about how I should invest it for retirement, but I’m scared to do so. I don’t know anything about investing, and it sounds mostly like gambling to me. (Also, my parents lost a bunch of money in bad investments when I was a kid. They let my uncle invest their money, which was probably the main problem, but it was bad. They still haven’t been able to retire.)

I know that my savings has already declined in value because of inflation, and I could have avoided that if I put my money in the market. Or maybe not? I keep hearing that the market is extra turbulent right now, so maybe I should wait a little longer. I also have no idea how or where to start. What is the safest way for me to do this? Any other tips for nervous first-timers?

I’m impressed by your self-awareness. Plenty of people are nervous to invest their money, but can’t pinpoint exactly why — usually it’s because they don’t understand how the process works. And who can blame them? I’m not here to make you or anyone feel bad about this. The stock market is complex and full of unknowns. It makes people anxious for a good reason: It’s out of their control. Keeping your money in your bank account, where you can see it, might seem less risky.

But in fact, the opposite is true. The only thing certain about keeping your long-term savings out of the market is that its value will dwindle over time. In 30 years, your $40,000 will be worth less than half of its current purchasing power, even if inflation stays at a modest 3 percent (it’s currently at 9 percent). That’s a huge risk to take with your money! But if you invest it properly, its growth will outpace inflation even by the most pessimistic estimates — a much less risky decision, objectively.

To determine your next steps, I spoke with two certified financial planners who have experience with clients in your position. We’ll get to their advice in a minute. First, I also want to address your parents’ history with investing, which understandably freaked you out.

Everyone’s relationship with money is shaped by their childhood experiences, good or bad. (I still have a vivid memory of my dad buying a new TV when I was 8 and being concerned that we couldn’t afford it — these moments affect us deeply.) Seeing your parents lose their savings to bad investments was a major event that clearly affected your outlook on money in adulthood. In your shoes, I’d be scared of investing too. But that fear is actively hurting your future financial security.

Three things can help you process this: education, exposure, and professional help. By learning more about investing (and trying it yourself), you’ll feel more confident about avoiding your parents’ mistakes. You might also consider meeting with a certified financial planner who specializes in clients with difficult financial histories and/or anxiety around money. (Planners who are trained to manage the psychological aspects of personal finance are often known as “integrated financial planners,” and you can find them on the XY Planning Network.)

Now for more specific advice on your $40,000. Your first step is to determine what you should keep for your emergency fund, says Manisha Thakor, a certified financial planner and founder of MoneyZen. Ideally, you’ll want to have about four to six months’ worth of living expenses tucked away in a high-yield savings account. It’s there for a worst-case-scenario like losing your job, getting in a freak accident, etc. Set it aside, and know that it’s there to keep you safe.

Next, you’ll want to figure out how much to invest. “I always ask my clients, how much money do you have that you won’t need to spend in the next five years?” says Thakor. “That’s the money you’re going to put in the market.” It’s okay if that number is small to start. The longer your timeline, the more your investments will grow. It also gives you leeway if the market dips. You always want to be in a position where you can ride out turbulent periods without being forced to cash out and take a loss. (Your emergency fund also ensures that you have plenty of cash if you need it.)

Now you have to decide how you’re going to invest it. Assuming your annual income is less than $144,000, then you qualify to open a Roth IRA, which is a specific type of retirement account for money you’ve already paid taxes on (i.e., the money you’ve saved from your paychecks). This is a great place for you to start. The maximum amount of money that you can put in a Roth IRA this year, according to the IRS, is $6,000. Go for the max — you can afford it! That money will grow tax-free until you’re ready to take it out, ideally in retirement (you do have to leave it in the account for at least five years, per the IRS rules, but you’re already planning to do that, for reasons we covered).

There are a lot of ways to open a Roth IRA. But for the sake of simplicity, Stephanie Genkin, a certified financial adviser and owner of My Financial Planner, recommends doing it at Vanguard, a low-fee investment-management company with a very user-friendly website. (Thakor is a fan of Vanguard, too; full disclosure, I also keep my IRA there.)

From there, Thakor advises investing in a target-date fund, which is a broad mix of thousands of different stocks and bonds that is designed to “mature” when you near your retirement age. Put simply, its contents are selected to prioritize growth when you’re younger and then evolve to prioritize stability when you’re older. This ensures that when you’re ready to retire and start taking distributions from the account, a market dip won’t have a big impact on your funds. A good choice for you would probably have a target date of 2050 or 2055. Once you’ve set that up, all you have to do is keep contributing to it every year, ideally the maximum amount annually. Congratulations.

Another important consideration: Does your employer offer a 401(k) or similar retirement benefit? If so, you’ll want to start contributing to it directly from your paychecks, at least 10 percent of your salary, especially if there’s an employer match (free cash!). This will keep your taxes lower and help prevent you from second-guessing yourself when you have the occasional panic about investing (it’s done automatically so you don’t have to think about it). You can select a target-date fund for that one, too.

Finally, you mentioned that you’re nervous about the market’s current turbulence. I agree that there’s a lot of panicky noise about this. The thing is, no one times the market perfectly. Thakor puts it this way: “There’s a classic saying that ‘time in the market matters more than timing the market,’” she says. “You don’t need to sit there worrying about what the market is doing. What matters most is that your money is in the market on its best days. And the way to do that is to put it in and leave it there.”

Finally, some people will tell you that you’re behind on your retirement savings because you didn’t start investing until now, and you need to “catch up.” You can ignore them. The important thing is that you’re getting started, and you’ll stay consistent. Once you get more comfortable, you can invest more and more of your savings and watch it grow.

The Cut’s financial advice columnist Charlotte Cowles answers readers’ personal questions about personal finance. Email your money conundrums to

I Know I Should Invest My Money, But It Makes Me Anxious