Investing is an unknown territory for many people, but young people may have more difficulty understanding its importance. Young professionals who just launched their careers are likely paying off their student loans, putting their plans to invest in the back burner.
Millennials are delaying investing for several reasons. They believe they have the time to invest later on. They may have other priorities, like the latest smartphone, embarking on road trips with friends, or simply hanging out at the newest bar. Those who experienced financial hardships growing up prefer to have their cash tucked safely in their wallets.
To Invest Young or Not to Invest?
Before we start discussing why it’s crucial to start investing early, let’s look at some interesting statistics.
- According to PurePoint Financial, 56% of millennials does not have any money saved in their retirement.
- Less than 25% of millennials are financially literate.
- About 54% of millennials are worried about paying back their student loans.
Young people need to be guided and encouraged to invest their money while time is on their side. Financial literacy should be taught very early to instill the importance of budgeting, careful spending, and wise investing. There are plenty of sources that can help young people embark on their investing journey.
If you’re looking for great investment ideas for young people in Australia, make sure to be cautious not to fall for Ponzi schemes and other investment scams.
Reasons Why Investing Young Should Be Top Priority
When it comes to investing, beginning early is vital. Here’s why you should prioritize investments while you’re still young:
- You Can Take on More Risks
It’s common knowledge in investing that ventures with the highest returns are often more risky and volatile. People who invest when they’re older are more cautious about taking risks. Out of fear of capital loss, individuals who start investing later in life understand that money is difficult to recoup when something goes wrong.
When you invest in your 20’s, you can take on riskier investments. You still have time to recover your losses in case the market takes a downturn.
- You Can Save More Even With Little Money
When you’re still young, you usually don’t have much money to spare for investments. The good thing is, even small amounts can grow big over time because of compound interest.
By investing part of your earnings regularly, you can take advantage of the interest earned by your money. Investing early helps you take advantage of gains resulting from compound interest.
- You Become Responsible With Your Finances
Bad financial decisions can make a person more accountable for his spending behavior and money management. But why wait until you make a significant financial mistake when you can start becoming financially responsible at an early age?
Early investments teach you not to be impulsive about spending, so save your money while you’re still capable of working long hours.
- You Can Afford to Early Retirement
By regularly allotting a certain percentage of your earnings for investments while you’re still young, you can achieve your financial goals earlier.
Some people save money to buy a new car or the deposit for a new home, which is fine. But the savvy investor knows that saving for retirement is one of the most important financial goals. Financial experts say that 10% to 15% of your monthly salary must be set aside for retirement funds.
If you start investing early, you’ll have plenty of time to reach your retirement goals.
- You Have More Time to Accumulate Wealth
Compared to others who started investing later in life, you have more time to build your investments. It means you can diversify your portfolio with investments – from conservative, to moderately aggressive, and aggressive.
Starting your investment journey early on will give you more time to build your wealth at a slow but steady pace.
- You Learn to Handle Hardships and Difficulties
Life is uncertain. Even if you’re very responsible in managing your finances, you can stumble upon a situation that puts your financial health at risk.
People who learn to invest early can handle hardships and difficulties better. Investing not only teaches you to become wise with money, but it also builds your character and makes you more resilient to problems and challenges.
Many people are scared of the word ‘investment.’ The truth is, a young adult, even a teenager, can start learning the basics of investing. Investing young should be a top priority – it’s the only way to achieve true financial freedom.