To invest is to set aside money in the prospect of some benefit in the future. In finance, an investment is a monetary asset acquired with an idea that the asset will definitely provide an increased income in the future. The benefit from an investment is called a return.
We all know the significance of investment, but a lot of us have chosen to lay low rather than investing early in our professional lives.
We stay more focused on getting new gadget, appliances, buying the latest Smartphone etc.
More so, the most fundamental reality is that people really don’t understand that, the smallest of investments can make a very massive impact on your finances in the long run.
The Need To Invest
Investing early does not only builds a derf financial foundation for your life, but it also builds a foundation for the way in which to live your life.
If you want to be successful, stay provident in all areas, and think about the consequences of every decision you make.
Many research and survey has shown that the earlier you invest, the richer you become. By investing at an early stage of life, you learn a pattern of financial independence and discipline.
If you start investing early, the principle of compounding increases your returns on the long run. An early investment distinguishes between an investment and saving.
The best and right time to invest is during or after you complete your graduation, the age around 20s. An amount invested in the 20s would give you more returns than even double the same amount invested at age 40.
The six (6) Reasons why you need to invest Early
However, if you’re not sure about the advantages of early investing, here are six reasons why it’s best to start sooner than later.
1. Your Expenses Are Low
To be honest, when you are young, life is more economical. And, as you grow older, it’s a natural occurrence that your living expenses goes up.
As long as your expenses are still very low and pretty limited, you could start your investment little by little, it is said that “a little drop of water makes a mighty ocean”.
In reference to popularly said quote you could also consider the benefits of investing your money as early as possible for the future untold or unknown circumstances and needs.
2. Improves Risk Taking Ability
If you want more yielding returns then you have to learn to take more risk. There is a saying “Higher the risk, higher the reward”.
A lot of research has proven that younger investor have more risk-taking ability than an older one.
Older investors are usually conservative and want more stability in their returns, in order, they tend to avoid high-risk investment possibilities.
Conversely, a younger investor is consenting to take more risk to earn more return. They have a lot of profits years onward giving them chance to recover money even if they suffer any loss. The more time you have, the more financial risk you can tolerate. Why? Because you have more time to tackle financial storms and recessions.
More so, as you grow older, your risk-taking ability decreases. Your responsibility will increase.
Any financial mistake can bring a lot of troubles into your life. So as you grow older, it is always advisable to swap from high risk such as equities to low risk assets such as debt fund and fixed deposit.
3. Investing Early Leads To Financial Freedom
One of the many advantage of investing at an early age, is the freedom it will make possible in your life.
Have you met anyone that was stuck in a job they despise so much, all because they were too financially strapped to escape? Well, the truth remains that, if you start investing at a young age, that will never happen to you.
Have you even noticed that wealthy people don’t usually rely on their next paycheck to survive, so therefore, they have the freedom to pursue the things they are so passionate about.
As a result, of building up some wealth, your financial decision making won’t come from a place of fear. Your investments will allow you to make attack-minded and confident decision which is an opportunity most people who didn’t start investing early in life seldom, or never, get to experience at all.
4. Development of Better Financial Habits
The start of your financial life could be either the most dangerous time, or the most behooveful.
This is usually the time when you start developing some financial habits. similarly, while majority of people use that time to shape bad habits like, spending more than they earn, acquiring loans to purchase things they can’t really afford, and opening more credit cards because they have been led believed in a misconception their credit score is more important than their net worth.
Truth to be told , good investors avoid debt at all cost, because they like to earn interest, not pay it.
Good investors spend less than they earn, because they like having money to save and invest. A good investor also learns to be patient, because without it, compound interest won’t have enough time to build momentum.
5. Investing Early Provides Financial Security
If you start investing at an early age, you are actually securing your financial future. And let me tell you something, “life isn’t always a bed of rose“. Life is hard enough even without the added troubles that come from being financially unprepared.
Without much doubt, early wealth provides you with a safety net in the event of an emergency.
However, if a day comes that you need to rely on your wealth to get you through, you will be extremely glad if it were available.
Life is hard. So Invest early, and get prepared for the raining day.
6. You can Retire Early
Early retirement is an option if only you start investing early in life. So, if you have the intention of retiring while you still have some spring in your step, then now is the time to start.
Early age investment increases your probability of attaining financial stability at a young age. Saving for retirement from the age of 20s rather than the age of 40s is always a better idea.
Don’t be one of those people who waits until their friends start retiring, to start investing. The earlier you start investing, the earlier retirement will become an option for you.
It may seem like you have plenty of time, but it will slip away quickly. So, start investing money at an early age, because it will help you to retire early and you will be able to enjoy the comfort of life you have been longing for.
You may even be asking “How does starting investment early in your life help you in early retirement?”
The answer lies in the “Power of Compounding”. The earlier you start earlier your money start working for you.
Never think that the young age is a hindrance to investing, because you are never too young to invest. The little amount of money invested now will put more money in your pocket in future. By investing early, you are giving yourself the liberty to pursue life confidently, and with a clear purpose and understanding.