Put together a plan outlining your investment goals. Are you trying to grow your savings for a house deposit or for retirement? Do you want access to the money in a year or two, or are you investing for the long term? Do you want to make high-risk investments? The answers to these questions will narrow down your investment options.

2. Cut debt

Before you invest any spare cash, pay off your debts. Variable mortgage rates are around nine per cent and some credit cards charge more than 20 per cent interest, so paying off these debts gives you a pretty good return.

3. Educate yourself

Start taking an interest in your money and building your knowledge. Read books about investing, learn about investment terms and products, do internet research or read the business or money section of the newspaper. You can even do a course with the Australian Stock Exchange.

4. Get good advice

Speak with the financial planner at your bank. They offer free advice on how to build savings and wisely invest them, but remember they may be biased to the bank's products.

Independent financial planners will only see you when you have substantial savings to invest.

5. Save a little regularly

The way to build a nest egg is to save a small amount on a regular basis and then invest the money. If you're starting from scratch, open an online savings account - they pay the highest interest and charge the lowest fees. Transfer a set amount from your usual transaction account to your online savings account
every payday until you've put aside enough money to invest in things such as managed funds.

6. Buy quality

Once you've got some money saved, shop around for wise entry-level investments. Stay away from high-risk investments that promise the earth. If you're keen on the stock market, start with a managed fund. This way, you can let experts pool your money with other investors and buy and sell stocks on your behalf.

7. Diversify

Make sure you spread your risk. Balanced portfolios buy stocks in different sectors and invest money in lower-risk alternatives, such as property and fixed-interest products.

8. Don't panic

Stock and property prices go up and down. Don't panic and sell at any sign of trouble - investing is for the long haul. If you have a good, balanced portfolio you should ride out the lows and enjoy the highs.

9. The magic of compounding

When your investments start making returns, reinvest the money. Earning on your returns really multiplies your money in the long term.

10. Follow your investments

Don't drive yourself crazy looking up share prices on a daily basis, but do keep up to speed on company news and market trends, follow managed fund returns, and monitor gains and losses in property. The question to ask yourself is: are my investments working hard enough for me?

For more advice from David Koch, check out the latest issue of New Idea - on sale now!