I am turning 18 next month and want to start investing. What do I do first?

By Aditi Shrikant

Learning to regularly contribute to investment accounts can help form healthy financial habits

"I do freelance photography. I have earned about $1,000."

Dear Dollar Signs,

How do I start investing as an 18-year-old? I've never invested, but have always wanted to. My goal is to start in December when I turn 18.

I don't have a job right now, but I do occasional freelance photography work and have earned about $1,000. So far, I have saved about $400 because I usually reinvest in new gear or spend it on personal stuff.

Please advise,

Growth mindset

If you're just starting out on your money or career journey and have questions about how to navigate your finances, we want to hear from you. Write to Dollar Signs, MarketWatch's new advice column, at dollarsigns@marketwatch.com.

Dear Growth,

The fact that investing is top of mind for you and many other Gen Z Americans genuinely impresses me. Investing - not owning a home - is actually the No.1 financial milestone that makes your cohort feel successful, according to data from Entrata.

And you're smart for starting so young. Even if you don't have a ton of money, learning to regularly contribute to investment accounts can help form healthy financial habits and set you up to be able to reach other goals like homeownership.

Before you start investing, you need to build up a cash reserve. It's great that you have $400 saved, but an emergency fund should have about six months' worth of expenses in it. Some research suggests that having $2,000 in cash saved for emergencies can meaningfully improve your sense of financial stability. Keep this money in a high-yield savings account, so that it will accumulate interest.

I know that investing seems sexier than saving, but building good financial habits can ensure you have long-term success when it comes to investing. I'd also be critical of, if not totally dismiss, any advice you find on TikTok or Instagram. Many social-media "experts" are unqualified or, even worse, pushing stocks they've been paid to promote.

"Investing should come after understanding the basics of budgeting and maintaining some cash for unexpected expenses," said Mark La Spisa, a certified financial planner based in Barrington, Ill.

Once you have six months' worth of expenses in the bank, you can start looking into investing. Index funds that track the S&P 500 SPX, such as the Vanguard S&P 500 ETF VOO, are a great place to start, La Spisa said. Automate your contributions so that once a week or once a month, a small amount is invested in the fund.

"Even $10, $25 or $50 at a time can be invested," he said. "The goal at this age is to establish the habit, not to try to get rich quickly."

He also advises against buying trendy stocks. One of the key factors in creating wealth is time. That's because compounding interest allows your initial contribution to earn interest, and your interest to earn interest - so even the smallest amount can grow into something substantial. Trading stocks might sound fun, but it's far more risky.

"Learning to save regularly, diversify, keep costs low and leave the money invested is likely to be far more valuable than trying to identify the next hot stock," La Spisa said.

Dinon Hughes, a certified financial planner at Nvest Financial and fellow Gen Z-er, suggests splitting your investments between an index fund and a Roth IRA. A Roth IRA is for long-term investments only, so do not contribute any money you'd like to use in the short-term.

"While you may want to take a more cautious approach with your brokerage account, as you may want to use those funds in the intermediate term, your Roth IRA is a retirement account and should only be used for long-term investing," he said. Hughes also echoed the sentiment that all investing should happen after you build up your cash reserve.

You have time on your side and, perhaps more importantly, an interest in learning how to responsibly invest. So long as you continue to consult certified financial planners, as opposed to social media or untrained "experts," I have faith that you'll make wise fiscal choices and grow into a savvy investor.

Write to Dollar Signs at dollarsigns@marketwatch.com.

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-Aditi Shrikant

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