You know how tree lovers would say that the best time to plant a tree is 20 years ago and the second best time to do it is right now? That also applies when it comes to growing your money. After all, money comes from trees. And since you’re probably in your 20’s or 30’s now, you should know how important investing at a young age is. After all, the best time to invest has already gone.
Not convinced with that analogy? Then here are more reasons why millennials and Gen Z-ers should start dabbling with financial investments as early as now.
Why You Should Start Investing at a Young Age
It Will Educate You About Compound Interest
Once you decide to learn more about investments, prepare to hear compound interest a lot. But what is it, exactly? Compound interest is accumulated interest from your initial deposit. Basically, you’re earning interest on top of the interest you already earned.
So if you invest PHP 20,000 now on a savings account with a 5% annual interest rate, compound interest will snowball your initial investment to PHP 25,525.63 after five years. You can save time computing for compound interest by using an online interest calculator[1].
And why should you learn this as early as now? Because you will probably have more patience to learn new things compared to your future self. Compound interest is just one out of many financial concepts you’ll encounter in your investing journey. Just don’t be intimidated by the numbers.
It Will Help Cultivate Good Money Habits
Investing at a young age will force you to define your goals in life. After all, you probably won’t be motivated to learn all about these complex financial concepts without a strong incentive. And now that you have a concrete reason to invest, you will then be forced to improve your money habits. After all, you would want to see your money grow.
Committing yourself to growing your investment can help cultivate good money habits that you’ll carry with you for years to come. It can also help you curb those pesky spending urges you get when you’re bored or hungry. Instead of adding to cart, why not add your spare cash to one of your investments? Now that’s a good habit to develop.
It Will Help Build a Better Financial Portfolio
Another advantage of investing at a young age is you’ll have more time to experiment and make mistakes when it comes to your money. You’ll have more confidence to risk more just to build the perfect financial portfolio. And having a diverse financial portfolio means more opportunities to grow your money. Now that’s how you ace being an adult.
Managing a number of financial investments will also make your life easier when it comes to applying for loans, credit cards, and even tourist visas. And when you have more than one sources of income, you can easily fund your passions in life without breaking the bank.
It Will Be a Lot Easier in the Future
With technology moving the way it is now, investing at a young age will only become simpler in the coming years. Right now, we already have mobile wallets with investing options, digital banks with generous interest rates, and online trading platforms just waiting to be downloaded to your smartphone or computer.
Starting an investment has never been easier and cheaper, so what’s stopping you? Imagine the advantage you’ll get if you start now when investing is a lot easier compared to previous years. You’ll be able to maximize the resources of tomorrow with your investing experience—assuming you invested today. Stop procrastinating and start harnessing the power of investing early.
It Will Help You Retire Early and Enjoy It, Too
When do you imagine yourself retiring from the daily grind? If your idea of retirement starts at 60 years old and above, you should probably plan your golden years better. After all, how can you fully enjoy your retirement when you already have complications affecting your health? Imagine not being able to travel because your body’s too old to endure long trips.
That’s where the FIRE (Financial Independence, Retire Early) movement[2] comes in. It encourages young people to start thinking about when they want to retire and how they plan to accomplish that. One solution? Starting an investment as an additional income source. So if you want to fully enjoy retiring early, start building your wealth now.
Read more: How Millennials Can Prepare for Financial Independence
Final Thoughts
Investing at a young age doesn’t sound fun or hip, but it’s an important part of building your wealth. Did you expect rich people to just become rich without doing anything? Besides, learning about investments doesn’t have to be boring. You can find entertaining videos online explaining how investments work or you can follow financial influencers on social media.
This article also appeared in The Manila Times.
Sources:
- [1] Compound Interest Calculator
- [2] Financial Independence, Retire Early (Investopedia, 2021)
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