One of the most important things that you can do as an investor is to get an early start on investing. The old saying “the early bird gets the worm,” certainly applies to investing in a big way.
Investing is defined as making an investment in order to earn a profit, and earning that profit will be much easier to do if you get an early start. Investing at a young age isn’t always easy, but the benefits are numerous and can’t be overlooked.
Here is a look at five of the best benefits of investing at a young age:
- Time is on your side - This is the most straight forward of all the benefits, but yet it may be the most important of them all. Quite frankly 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 time period of being able to save money to invest and a longer time period of being able to find investments that can increase in value quiten nicely.
- Compounding returns - 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. Regular investments in an investment portfolio or a retirement account can lead to huge compounding benefits.
- Improves spending habits - This benefit is generally overlooked by many, but investing early on definitely helps develop positive spending habits. Those who invest early on are much less likely to have issues with overstepping their boundaries in spending over the long run. Investing teaches important lessons and the earlier you are able to learn those lessons the more you can benefit.
- Ahead of the personal finances game - If you are a young investor you are putting yourself ahead in the world of personal finance as a whole. By growing your investments over time 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.
- Quality of life - The basic quality of life is a huge benefit of being an early investor. By investing early in things such as Roth IRA’s and retirement accounts you should be able to avoid having to make frantic moves near or during retirement. Quality of life during your retirement years will be much better because there will be less stresses and more of a nest egg to work with.
It is important to note that saving money to invest at a young age isn’t easy, but you simply can’t afford to wait to invest when it is convenient. Don’t shy away from investing because you don’t have enough, simply start with making small investments and give them time to mature. Investing while you are young is one of the best decisions one can ever make.
Aaron K. Smith is a freelance writer with experience working in the mutual fund industry and writing about investing and the stock market. View all posts by Aaron.