It’s important to learn financial discipline at an early stage of life to avoid difficulties in future. Early investors have a significant advantage and if you start investment at a young age it can ensure a sound financial future. Teenagers today have the opportunity to start investing at an early stage with the growing accessibility of financial markets and different savings instruments.
Often, in our early or mid-20s, when we begin our first jobs, the allure of newfound financial freedom can lead to prioritising spending over saving or investing. However, mastering the art of managing money is crucial for a healthy financial life. And part of this equation is learning how to grow and multiply money through investing.
How can investing early be helpful?
Early investments can empower individuals to create a life they dream of. The magic number for the right age to start investing may not exist, but the answer is clear: start as soon as it is practically possible. The sooner one begins their investment journey, the more time their money has to grow and compound.
How much of a difference does it really make?
The immense value of interest compounded is the key to starting investing early. Think about two scenarios: one where a person begins investing at 25 and the other at 35. The difference in the ultimate sum after 35 years, if both invest Rs 5,000 and Rs 7,000 per month, respectively, at a 10 per cent annual compound interest rate, is impressive. Early investors would make a substantial profit of Rs 1.71 crore, while later investors would amass Rs. 72.65 lakhs.
What perks does starting investments at an early age have?
- Early investments instill a habit of saving more, leading to greater returns in the long run.
- Young investors have more time to recover from potential investment losses, reducing the impact on their overall portfolio.
- Compounding returns grow exponentially over time, and regular early investments can yield substantial benefits during retirement.
- Investing from an early age increases the chances of achieving financial stability in the younger years, providing a sense of security and freedom.
- Early investments can act as a safety net during unforeseen financial emergencies, offering a sense of financial independence.