There are so many reasons why you should start investing early! When you’re young, it seems easier to push investing in your later years because you think you’ll be more financially secure by then. However, your twenties is the best time to enter the investing world even with debt and low salaries.
Related Content:
- 10 Things You Need To Do Before You Start Investing
- How to Start Investing in Stocks With No Experience
- 5 Best Accounts You Must Have to Build Wealth
Most young adults don’t also want to invest early because of delayed gratification since they won’t see their yields for the next 30-40 years. The truth is investing early is the best way to build wealth for your future self.
There are many ways to invest: stocks, bonds, real estate, commodities, mutual funds, and much more. Do diligent research to find the best that you want to pursue.
Reasons Why You Should Start Investing Early:
1. Time
Time is on your side! Young adults have the time advantage to take on more risks and still have the time to recover from a loss if that happens. If you start investing at a later stage in life, it is much harder to recoup your loss. Investing early allows your investments to grow in value.
While salary may be low or money may be tight, time is the most valuable asset to take advantage of. For example, investing $200 a month starting at age 20 will grow to over $900,000 by age 65 based on an 8% annual rate. Investing the same $200 a month starting at age 30 will grow to over $400,000 by age 65.
As you can see, $500,000 was missed in the first 10 years. Investing is for the long run; the longer you put your money to work, the more returns you get.
2. The Power of Compound Interest
You know that phrase: “Make your money work for you?”
Thanks to compound interest for making that possible. Compound interest is the ability to grow an investment by re-investing the earnings (interest earned on interest). It is so powerful that Albert Einstein referred to it as the “eighth wonder of the world.”
Let’s see an example: if you invest $1,000 a month in an index fund at 8% annual return starting at age 20 until age 45 and re-invest your earnings, you will have over $800,000. If you push it to 65 years old, you will have over 4 million dollars in investments (*mind blown*).
This is how people can live off of the interest of their investments. Eventually, your investments will hopefully replace your paychecks.
“Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” – Albert Einstein
3. High-Risk Tolerance
The younger you are, the more risks you are willing to take, and the older you get, the fewer risks you can take – you get the gist.
Now, I am not saying that young adults in their 20s should dump all their money into volatile investments and not care how they invest. Someone with 40 – 45 years left until retirement has a greater chance of making more money on an aggressive portfolio than one with a shorter time.
This is where compound interest can work its magic. The more time you have, the better off you will be.
4. Take Control of Your Future
One of the many benefits of investing early is the freedom that comes with it.
Building wealth gives you the option not to rely on a paycheck for survival. Your investments are helping you with your expenses without you lifting a finger. Financial freedom allows you to pursue the things you are passionate about.
Not only do you gain financial freedom, but you also gain financial security and early retirement. Since you built wealth at an early age, you will feel confident in making financial decisions. You have a safety net in case of an emergency.
Who doesn’t want to retire early? Investing early allows you to do just that!
I know it is hard, but your future self will thank you for all your hard work.
5. You’ll Regret it If You Don’t
Though I’m in my early 20s, I still wish I had started investing way before now. Time flies by so fast that you have no idea. The next few years are going to be crucial for investing in preparation for the future.
Take control of time now and start investing right now. Before you know it, you will look back on the years of financial opportunities you could have taken.
Final Thoughts
Choosing to invest at a young age is one of the smartest decisions to make. You are taking control of your future by allowing yourself to build wealth, retire early, and create a life of security and freedom.
Investing can be daunting, I know. However, there are so many resources at your disposal. This is why I created this blog: to empower women through financial literacy and ultimately reach financial independence.
So, take a bold step, and start investing early.
Don’t forget to check out my post on How to Start Investing in Stocks With No Experience and 10 Things You Need To Do Before You Start Investing.
Related Content:
- How To Properly Manage Your Money
- Read the Best Free Budgeting Apps
- The Best Credit Cards for Beginners
- How to Choose the Best Credit Card for You
What is stopping you from investing? If you’re already investing, what methods or strategies did you use to get started? Comment below!
If you enjoyed this content, please comment, share, pin, and tweet!
