Every financial journey has its own set of considerations that make it uniquely suited to you. 

These range from what you want from your money, how much you'll need to get there, and what steps to take to make your dreams come true.

No matter how you approach this, one thing remains constant: investing is critical in achieving most financial goals. 

Let's look at why that's the case.

How does investing work?

For the most part, when you hear about investing for your financial goals, it's often referring to buying stocks and bonds. 

Investing in the stock market could be a way to put your money to work, grow your nest egg, and reach your financial goals. 

And thanks to compounding — when your previous profits earn you new profits — the longer you invest in the market, the better your chances of growing your money. (But remember, investing in the stock market involves risk and doesn't guarantee a profit.)

In other words, suppose you want to save $50,000 for your child’s college education. You wouldn't necessarily need to save every penny of that $50,000 — here's how it works:

• Say you invest $175 in a diversified investment portfolio every month. 

• Over 15 years, you'd put in a total of $31,500 yourself. 

• Assuming your investment grows by an average of 6% each year — a conservative estimate compared to the average annual returns of the S&P 500 — you could have more than $50,000 in 15 years. 

• You would have the potential to generate more than $19,000 in returns on the $31,500 you put in over all those years. (Try our compound interest calculator to see for yourself!)

Just know that 6% returns is a conservative estimate. The S&P 500 has generated average annual returns of around 9.5% for the past 100 or so years. But it's a good rule of thumb to use a more conservative number for your financial planning. Here's why:

1. No one can predict the future. It’s unrealistic to expect the market to always repeat its previous success. Some years, the market will return more, and some years, less. 

2. You’re less likely to be caught off guard. For example, if you plan for 6% returns and get 9.5%, that’s great news. But if you plan for 9.5% returns and get 6%, that could be a costly setback and you may have to make some changes to keep your financial plan on track. 

What is ROI?

In investing, the point is the potential return on your investment, or ROI.

Here's how to calculate ROI for your own investments. Consider these two numbers:

• The price you paid for an investment

• The current price of the investment

ROI = Net income / Cost of investment x 100

Let’s say you have a net profit of $10 after selling a stock. If you originally bought the stock for $40, your ROI is 25%. (Sold stock for $50 - Purchased stock for $40) / $40 purchase price x100 = 25%)

This number isn't always positive. Sometimes you’ll end up with a negative ROI if you sell an investment for a loss. Just remember: you don't lock in a loss until you sell.

But it's important to know that investing comes with risks. Earning higher potential returns means you have to make a tradeoff. In investing, that tradeoff is risk. 

By investing in stocks and bonds, you accept the fact that the market will move up and down in the short term. But in the long term, you may have more opportunities to grow your money. 

Setting realistic investment goals

Investing can help you reach your goals, but how do you know what those goals should be? Here's how to set realistic money goals in three simple steps.

Step 1: Establish why you're investing

Ask yourself, what do you want your money to do? It's okay if you have multiple answers — most people do. Just realize you won't be able to do everything at once, and some goals may need to take a back seat to others.

Suppose you want to buy a luxury car and save for retirement, but your budget can only accommodate one. Which do you choose? 

One thing you can do is bucket your goals into needs and wants. In this case, a luxury car is a want, and retirement a need. 

Plus, a goal like retiring requires decades of planning and saving. Putting it off until you can afford a luxury car could prevent you from retiring when you want. So when you have goals well into the future (like saving for retirement or starting a college fund for your kids), it's a good idea to get started sooner rather than later. That'll give you time to work towards all your goals.

Step 2: Pick an investment strategy

You've made your list (of goals), and checked it twice. Now what?

You need an investment strategy that will help you achieve your financial goals. 

Some common strategies include: 

Active Investing
A more hands-on approach where you frequently buy and sell stocks to beat the market. Remember that spending time researching stocks and the market is not guaranteed to generate higher returns. 

Passive investing
Passive investing is a more hands-off approach where you buy and sell stocks to mirror the market. This investment style may appeal to new investors who want to avoid doing additional research. 

Short-term investing
Short-term investments may be best suited for those who need their money in the next zero to five years. Short-term investors can find their sweet spot in bonds, certificates of deposit, and high-yield savings accounts. The returns are often lower than what you can get with stocks, but these types of investments are also less risky. 

Long-term investing
Long-term investments are typically for investors who have a longer time horizon. They'll typically buy stocks and hold onto them for decades. That's because the stock market has historically increased over long periods of time. So while there will be ups and downs along the way, the market — and your portfolio — should ideally be higher when you eventually need it. 

In general, consider an investment strategy that matches your time horizon and risk tolerance. The longer you have to reach your goals, often the more risk you can take, and vice versa.

Step 3: Crunch the numbers

Revisit your goals and budget to determine an appropriate course of action. 

Suppose you want $100,000 saved in your child's college account. You'll need to think about a few things:

• How long do I have until my kid turns 18?

• What is my starting investment?

• How often do I need to contribute to this account?

• How much do I need to contribute?

• What rate of return can I expect?

You don't need to have all the answers yet, but you will want a good sense of how much you ultimately want to save up, how much you can contribute based on your budget, and how long you'll be investing for. You can then work backward from your goal to determine how, and when, to invest.

How to use and read an investment calculator

Our free investment calculator can help you estimate how much your investment can grow over time while you determine an optimal course of action. 

Here's what you tell it:

Investment goal

Your target investment outcome, or how much money you want to end up with. 

Years to reach your goal

How much time you have to reach your goal.

Initial deposit

Your initial investment at the beginning of your financial journey. 

Contributions

How much and often you plan on contributing to your investment account. Be realistic here. A recurring investment may make more sense than making a one-time lump-sum investment.

Average annual return

What you expect to earn from your investments each year. One easy rule of thumb is to use a conservative estimate of 6% for average annual returns. 

And here's what we'll tell you:  

Potential future balance

We'll estimate how much you could end up at the end of your financial journey. Ideally, your potential future balance equals or exceeds your investment goal. If not, you may need to increase your contributions and/or invest more frequently to reach your goals. Some trial and error can help you get to a plan that fits your budget and achieves your goals. 

How to open an investing account

Get started with Acorns Invest and take a step forward in your money journey. Tell us about your goals and objectives, and we'll recommend a diversified portfolio for your future. 

All you have to do is fund your account. With Acorns, there are several ways to do that. You can set up a Recurring Investment for an easy way to make periodic investments that could help you take advantage of compound interest over time. You can also turn on Round-Ups® to invest your spare change every time you swipe your credit or debit card.