“Often greater risk is involved in postponement than in making a wrong decision.” Harry A. Hopf
Very often when you wait so long to do something, you will miss out the entire opportunity. If you procrastinate because you are fearful of making a poor choice, life is going on without you and you might end up regretting your procrastination.
When you’re younger, investing for something that’s years away such as retirement may not seem important. But that is exactly when you should start investing. The more money you invest, the more time it has to grow. And one of the ways to give money a chance to grow over the long term is by investing.
Investing from a young age is one of the most important lessons in personal finance. Investing at a young age isn’t always easy, but the benefits are numerous and can’t be overlooked.
Here are four benefits of start investing early:
1. Time is on Your Side
One of the biggest benefits of investing young is that you get more time. Time is a valuable asset in the world of investing, and luckily, young people have it in abundance. Even if you start small, you’ll be surprised to know what a difference it can make if you invest now, instead of ten years later.
In particular, if you begin investing at a young age history tells us that you will end up with far more than those who invest later in life. Having time on your side means having a longer period of being able to save money to invest and a longer period of being able to find investments that can increase in value overtime.
Compounding returns are extremely powerful over the long run, and the earlier you get started the greater your chance is to take advantage of this. Put more simply this is the power of the time value of money.
For example, if you are 25 years old right now, and you invest $250 every month, then after 10 years, you will have saved $40,969 (at an interest rate of 6%, compounded monthly). If you begin to invest the same amount when you are 30 years old, then you will have only $17,442 by the time you are 35. That’s a difference of 43%!
You can easily see that the earlier you start investing, the longer you will be in the game. Time is the secret ingredient in compounding. The more time you have to invest, the wealthier you will be.
2. Learning from Experience
Experience is the key, most of us learn best from experience. Sure, we can read and learn from books and the vast amount of material on the internet. However, it’s not the same as going through various situations personally.
Starting to invest when young provides you great exposure to how the financial market works. Whether you choose to invest in the stock market, ETFs, mutual funds, or get a savings account, it helps to know your way around how everything works. Knowledge is power, and an experienced investor is a smart investor. Once you get an appropriate amount of market experience, it will help you identify new avenues of investment. You can also distinguish between authentic investment opportunities versus superficial ones. This automatically helps you make better choices in terms of the risk and return of an investment.
Young investors have the flexibility and time to study investing and learn from both successes and failures.
3. Managing Your Money Better
when you start investing young, you automatically begin to understand the value of money. An investor knows the difference between unnecessary expenditure and a lucrative investment. As a result, every investor tends to take on strategic approach in how they handle their money. in the long run, this is one of the best wealth accumulation techniques, investing early definitely helps develop positive spending habits.
Those who invest early are less likely to have issues with overstepping their boundaries in spending over the long run.
Investing early teaches important lessons and the earlier you are able to learn those lessons the more you can benefit. If you are a young investor you are putting yourself ahead in the world of personal finance as a whole. By growing your investments overtime you will be able to afford things that others can’t.
Your personal finances are bound to get tight at times throughout your life, and investing at a young age can help in those tight times.
4. Recovering from Bad Investments
Investment is based on two basic principles: Risk and return. As an investor, you naturally try to minimize your risk and maximize your returns. However, not all investments end up being lucrative and may backfire.
The good news is you still have time to recover from any setbacks caused by a bad investment. You can take a break and wait until you are able to accumulate money for investing again. This also applies to when the market is down, and there are a limited number of investment options available. Instead of rushing into it, you can wait for the market to recover and invest at an appropriate time.