Unit 7: Investing and Building Wealth

Last updated 10/14/2026 by

Andrew Latham

Summary:

Money invested at 18 has close to 50 years to grow before a typical retirement age. A handful of ideas, plus the patience to ignore market noise, covers most of what a lifetime investor needs.

This is Unit 7 of 9 in Money 101 by SuperMoney, a free personal finance course. It takes about 2.5 weeks in a classroom, or 45 to 90 minutes on your own. Then take the five-question quiz below. Score 4 of 5 to mark the unit complete.

What you’ll learn

Explain the relationship between risk and return.
Describe stocks, bonds, mutual funds, index funds and ETFs.
Explain diversification.
Calculate the long-term cost of investment fees.
Apply the order of operations for saving and investing.
Evaluate investing claims from social media.

Key terms

Stock: A small piece of ownership in a company.
Bond: A loan you make to a company or government that pays interest.
Mutual fund / ETF: A basket of many investments bought in one purchase.
Index fund: A fund that owns every stock (or bond) in a market index, such as the S&P 500. Low cost and broadly diversified.
Diversification: Spreading money across many investments so one failure does not sink you.
Expense ratio: The yearly fee a fund charges, as a percent of what you have invested.
401(k): A workplace retirement account. Many employers add a matching contribution.
Roth IRA: An individual retirement account funded with after-tax money that grows and can be withdrawn tax-free in retirement. Anyone with earned income can contribute, including teens through a custodial account.
Dollar-cost averaging: Investing a fixed amount on a regular schedule regardless of price.

Lesson 7.1: Saving vs. investing, risk vs. return

Saving is for money you will need soon or in an emergency. It should be safe and easy to reach. Investing is for money you will not need for at least five years. It can lose value in the short run but has historically grown much faster than savings over long periods.

Higher potential return comes with higher risk. Over long periods, U.S. stocks have returned more than bonds, and bonds more than cash, but stocks can fall 30% or more in a bad year. Long holding periods help here. Investors who stay invested through downturns have historically recovered. Investors who sell in a panic lock in their losses.

Lesson 7.2: What you can buy

A stock is part ownership of a company. A bond is a loan to a company or government. A fund holds many stocks or bonds at once. An index fund owns everything in a market index, so you own a small piece of hundreds or thousands of companies for a very low fee.

Most professional stock pickers fail to beat a basic index fund over long periods after fees. For most people, a few low-cost, broadly diversified index funds are the core of a lifetime of investing.

Fees matter more than they look. A fund that charges 1% a year takes 1% of your whole balance every year, whether it gains or loses. Over decades that can cost a third or more of your final amount.

Lesson 7.3: The order of operations

A sensible order for each new dollar: (1) a starter emergency fund; (2) enough in your workplace 401(k) to get the full employer match, which is an instant return of 50% or 100% on that money; (3) pay off high-interest debt such as credit cards; (4) a Roth IRA; (5) more in the 401(k) or a regular brokerage account.

Teens with a job can open a custodial Roth IRA with a parent. You can contribute up to the amount you earned that year (subject to the annual limit). Money in a Roth grows tax-free, and starting at 16 or 17 gives that money decades of tax-free growth.

Lesson 7.4: Hype, crypto and finfluencers

Social media is full of people promising fast, guaranteed returns from a hot stock, a new crypto token, options trading or a trading course. Ask three questions: How does this person make money? (often by selling you something, or by selling after you buy). What is the risk? (if no one mentions it, it is large). Is it diversified? (putting everything in one asset is a bet).

Watch for pump-and-dump schemes: a group hypes a small, thinly traded stock or token, the price jumps as new buyers arrive, and the promoters sell at the top. Crypto assets are highly volatile, are not FDIC insured and are a common vehicle for scams. If you choose to buy any speculative asset, keep it to a small amount you can afford to lose entirely.

Worked example: the early saver and the late saver

Assumes a 7% average annual return, monthly compounding, no taxes or fees. Real returns vary year to year and are not guaranteed.

Early saver: $100 a month from 18 to 28, then stops	Puts in $12,000. Has about $229,000 at 65
Late saver: $100 a month from 28 to 65	Puts in $44,400. Has about $210,000 at 65
Fees: $10,000 for 40 years at 7% before fees	0.05% fee: about $147,000. 1% fee: about $103,000

Takeaway: Starting ten years earlier beat contributing almost four times as much. And a 1% fee would cost about $44,000 on a single $10,000 investment.

Activity: Build a starter portfolio

Using a compound interest calculator, reproduce the early saver and late saver numbers. Then design a simple portfolio for $1,000 using no more than three low-cost index funds, and explain why you chose them. Finally, find one investing claim on social media and evaluate it using the three questions from Lesson 7.4.

Early saver result at 65, and your own version starting at your age
Your three funds, what each holds and its expense ratio
The social media claim you found
How does the person make money?
What is the risk?
Is it diversified?

The printable worksheet and the sample documents for this activity are in the Money 101 course book (PDF).

Reflect: If you could invest $25 a month starting today, what would you choose and why?

Up next: Unit 8: Protecting Yourself: Insurance, Identity and Scams | Previous: Unit 6: Paying for College and Career Training | Course overview

Andrew Latham

Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.

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