From Allowance to Assets: A Guide to Investing and Wealth-Building for the Modern Sugar Baby

Sugar baby investing is a sure way for you to start building your personal financial wealth and independence. But, if you’ve never invested before, you’re not alone! There are many reasons why sugar babies don’t think about investing their allowance, whether they’re struggling to build up savings or simply intimidated by the thought of losing their earnings.

In this article, we’re going to talk about the benefits of sugar baby investing and simple, safe ways for you to get started. With small changes to the way you spend your allowance, you could start to build up some serious wealth over time!

Why every sugar baby should learn about investing

Lots of sugar babies don’t invest, choosing instead to use their allowance to pay for living expenses or to treat themselves to whatever they might want to buy. And that’s okay! But, there are also some compelling reasons why many sugar babies are choosing to invest at least some of their earnings, including:

• Building long-term wealth. Most people envision a future for themselves in which they’re better off financially than they were when they were younger. But, without taking the necessary steps towards building wealth, there’s no guarantee that that will happen.
• Setting spending goals. You might have thought of someday buying a new car or a house, getting a higher education degree, going on your dream vacation, or being able to retire. You’ll be able to reach these goals so much faster if you invest your money now.
• Reducing spending on unnecessary things. Investment is kind of like putting your money into those old school piggy banks that you had to break open when you were ready to get your money back out. And, when you allocate your money to your investments, it will mean that you have less free income to spend on unnecessary things like eating out, buying new clothes, etc. We’re not saying that spending money on yourself is a bad thing! But if you’ve had a goal to reduce your spending, investment is a good motivator.
• Reducing the impact of inflation. This is one that many people don’t consider, but investment can help you outpace inflation. Think of it this way: if you keep your money in a savings account, inflation is going to slowly chip away at the value of that money because it’s static. But when you invest that same money and it grows over time, your overall wealth will continue to climb, which will lessen the blow of inflation.

Every sugar baby has their own reasons for investing their allowance, but financial experts agree that investment is a smart decision for anyone!

Considerations before getting started

There are many sugar babies who would be interested in investment but simply can’t imagine having the expendable income to be able to get started. If you find yourself living month-to-month, for example, the idea of investing may seem out of reach. But getting started might be more accessible than you think.

For one thing, most financial experts recommend that you have some savings built up before you start investing. There’s no set amount that you need to have, but the suggestion is a rainy day fund that would cover about three to six months of living expenses if you were to suddenly lose all of your income. Once you have that kind of savings, then any extra expendable income (i.e., income that won’t go towards rent, groceries, bills, debt payments, etc.) can go towards investments.

Sugar baby investing options

Once you’re ready to get started with investing, there are many different avenues you can choose. And each one has pros and cons in terms of risk, rate of growth, etc. So, let’s break down some of the most popular, from lowest to highest risk:

Certificate of deposit (CDs)

CDs are a special type of savings account that you can get through most banks. And the idea is that you put a specific amount of money into the account and then don’t touch it for a set amount of time, anywhere from a few months to a year or more. But if you try to take your money out of the CD early, you’ll end up paying a fee.

In general, you can get started with a CD with a minimum of $500 or $1000. And, you’ll typically get an annual percentage yield of somewhere around 2% to 4%.

CDs are some of the safest investments that you can make, but they’re also the lowest-yielding. After all, if you put $1000 into even the highest-yielding option, you’ll still only make up to $40 a year. It’s $40 more than you had when you started, but it’s not life-changing.

Bonds

When you invest in bonds, the simple explanation is that you’re lending your money to a business or the government for a fixed interest rate and a set amount of time. Over time, the bond reaches maturity and you’re paid back what you invested, with interest.

There are many different types of bonds that you can choose from, including treasury bonds, government agency bonds, municipal bonds, and corporate bonds. Each comes with its own yields that will vary based on the risk involved, but in general, bonds are considered to be pretty safe investments. That being said, the value of a bond can change depending on things like inflation and fluctuating interest rates.

To give you a sense of how much you’ll need to get started, you can invest in a treasury bond for as little as $100.

Mutual Funds

If you want to get started with investing without having to put too much down all at once, mutual funds can be a good option. In this set-up, a money manager pools your investment with money from other investors in order to buy more expensive bonds and stocks. You then mutually own these investments. Like bonds, there are different types of mutual funds, such as fixed income funds, equity funds, or money market funds.

This is considered one of the safest investments because you’ll rely on a professional money manager to oversee the investment, and it’s common for the money manager to spread the money out over a variety of areas to lower risk and increase yield. That being said, it is possible for your mutual fund investment to rise and fall with market changes.

One thing to keep in mind about mutual funds is that they typically charge some kind of fee to cover the cost of maintenance, such as paying the money manager.

And, like CDs, most mutual funds have a minimum investment fee, which is usually at least $1000.

Exchange Traded Funds (ETFs)

Many people get ETFs and mutual funds confused because they function similarly. In other words, you pay into a shared fund with other investors, and your money is managed by a money manager. But the big difference is that EFTs are able to be traded throughout the day, whereas mutual funds are only able to be traded at the end of the day. That means that their value changes more frequently.

Buying into an ETF allows you to benefit from the lower risk of diversification. That’s because your money manager will spread the money out over a variety of investments instead of (as we’ll cover in a moment with stocks) just one.

Stocks

Stock trading is one of the riskier forms of investment that we’ll cover here, because depending on the company, stocks can rise and fall in value. Basically, when you buy stock in a company, you own a very small share of that company. And, if the company does well, so does your investment. But if the company does poorly or there are issues with the market, you could end up losing your investment.

Most people who want to invest in stocks hire a money manager whose job is to buy stocks when they’re low and sell them when they’re high. That’s how you make money investing in stocks. And this can be done in a very short time or a matter of years, depending on what kind of trading your money manager specializes in.

The price of the stocks themselves varies: some can be as little as $5 a stock, while others will be $100 or more. The price and value of a stock can tell you a lot about its level of risk and potential for growth, and there is an entire industry dedicated to tracking and understanding these factors. That’s why it’s recommended to rely on a professional financial manager when investing in stocks.

Working with a financial advisor

One common misconception that comes up when we talk about sugar baby investing is the idea that you can’t have a financial advisor if you’re not rich. But this is not the case at all! In fact, having a financial advisor when you’re just starting to build your wealth is a great way to make the process more efficient and safer! The key is to find a financial advisor that you trust and can rely on. Here are a few things to look out for when searching for the right advisor:

• How they charge and what their rates are. There are many different ways that a financial advisor may choose to charge their clients. Some offer a flat fee or a yearly fee. Others work based on commission or by carving out a cut of the assets that they manage for you. A potential financial advisor should be able to explain simply and clearly how they’ll get paid.
• How they talk about taxes. Taxes are a big consideration when it comes to investing, and you want to make sure that your financial advisor is giving you sound advice as well as working with tax professionals to help you when it’s time to file.
• Their credentials. Just like you wouldn’t want to go to a doctor who didn’t make it through med school, you want a financial advisor who is fully professionalized in their field. Don’t be shy about asking for their credentials and educational background.
• Their investment expertise. Asking about a financial advisor’s experience can give you important information about how they’ll treat your account. For example, let’s say that your sugar daddy recommended a financial advisor who has worked with their family for decades. It might be a good fit, but it’s also possible that that financial advisor is more accustomed to working with ultra-wealthy clients. That kind of mismatch could mean that your account gets put on the back burner or that your advisor struggles to give you relevant advice.
• How do they make you feel as a client? Overall, you deserve a money manager who is honest, non-judgmental, and professional. After your initial consultation, you should get a pretty good sense of whether you trust this person with your finances!

Final tips for sugar baby investing

In this article, we’ve covered the basics that you should know about the world of investing. So, here are a few final tips before we send you off into the world to start building your wealth!

• Prioritize paying off debts before investing. If your debts have a low interest rate, it could be feasible to invest while making monthly payments. But in general, financial advisors recommend paying off debts before you start your investment journey.
• Learn about compounding. Compounding is the practice of using what you earn through investments to invest more. This can be a strategic way to earn more over time than if you were to spend your investment earnings as you receive them.
• Spread your money out. Diversifying your investment portfolio can protect you from risk and loss.
• Build investing into your sugaring practice. There are so many ways that you can incorporate investing into your sugar relationships. The most obvious, of course, is to use your allowance toward investments. But you can also have your sugar daddy give you gifts in the form of stocks, cover your investment fees, or introduce you to their money manager. You can also opt to receive physical gifts that increase in value over time, such as certain luxury brand bags or, if you have a very generous sugar daddy, property!

We hope that the information we’ve shared here has motivated you to start putting your allowance to work for your future! And now you know that when you’re ready to start sugar baby investing, there are so many options available.