For many young adults, like myself, the idea of investing and/or saving for the future seems out of reach. It seems like a nice idea and something you would like to do, but you’re not sure how you are supposed to get that done when you feel like a hot mess in an unstable financial situation. Trust me, I get it. Maybe you have student debt, your rent is way too high or you just bought a car. On top of that, your career is only now starting to take off. You might say, “Jade, just give me some time to get myself financially stable and then come back to me. Talk to me when I have my life in order.”
But what you may not realize is that saving/investing in your 20s will actually benefit you more than if you were to wait until later when you supposedly have your "life in order". Here are 5 reasons why you should start investing now:
1) Time is on your side. Because of your young age, you have the opportunity to take significant advantage of compounding. Compounding is the process in which the value of your investment increases over time as the principal earns interest, and this interest is reinvested and also begins to earn interest. Take the below example:
Maria (25 years old) and Daniel (35 years old) both want to have $500,000 saved by the time they reach 65 years old. They decide that they are going to invest a certain amount of money each month. In order to reach $500,000:
Due to the fact that Maria is starting 10 years earlier than Daniel, she is able to pay $273.13 less per month. That’s more than $3,200 a year - imagine the number of shoes Maria could buy with that extra money.
When we look at the total out of pocket cost for each person:
Even though Maria is saving for 40 years and Daniel is only saving for 30 years, Maria still will end up spending less. Daniel waited 10 years too long and that’s going to cost him almost $60,000.
Even if you’re thinking, “But Jade, $327 a month is still a lot!”, I don’t want you to be discouraged by the dollar amount. I want you to focus on the point that Maria was able to contribute less per month, save more in total and still have as much as Daniel at the end of it all. Maria started investing earlier than Daniel and benefited in more ways than one.
Please note that the above figures were based upon an interest rate of 5%.
“In the long run, it’s not just how much money you make that will determine your future prosperity. It’s how much of that money you put to work by saving it and investing it.” - Peter Lynch, Former Manager of the Magellan Fund at Fidelity Investments
2) Risk isn’t as much of an issue. Since you’re young (and most likely wild and free), you don’t have to worry about risk as much. The money that you invest is probably disposable income, and you wouldn’t need the money back anytime soon. You are able to invest in more aggressive portfolios. You may experience more volatility, but you are also more likely to receive higher returns as time passes. Even if you do encounter some losses, you have time to recover.
3) You’re tech-savvy. It’s 2018, and we live in a digital age. Navigating around different websites is a breeze for you, which allows you to research your investment options quickly and easily. Therefore you gain knowledge and experience faster than ever. Everything is at your fingertips. At this point, it’s a necessity, especially when it comes to your finances. You probably have online/mobile banking. Now you just need the investment options to match the rest of your lifestyle. Lucky for you, Carilend provides the perfect opportunity for you as everything is processed online in an efficient and speedy manner.
4) Improve your quality of life. By starting to save earlier in life, you can feel more secure. Financial security has many benefits, such as feeling less stressed or worried and more willing to take risks. If you have an investment to fall back on, then you are more likely to take risks. For example, you may be working with a company for 5 years, you feel secure, and it’s paying fairly well. If you are presented with a job opportunity that could be slightly risky but also very rewarding, then you might be more willing to accept the job. Therefore with an investment, your chances of increasing your future income are also higher. Financial security will also decrease your chances of stress and worry, and we could all use less stress and worry.
5) Increase your knowledge and experience. If you start investing at a young age (even if it's in small amounts), then over time you will gain valuable knowledge and experience when it comes to investing. As time passes and your income increases, you may be in a position to make a larger investment. Lucky for you, you will have the knowledge, experience and power to make a smart investment. With your 10+ years of investing experience, you will be able to make an educated decision and choose the best option for your investment.
I know it can be hard to save at a young age when it may seem that your income isn’t even enough to cover your monthly expenses, but the benefits surely outweigh any negatives. Even if you just put aside a little bit every month, eventually you’ll have a significant investment. With Carilend, you can start a well-diversified portfolio with as little as $2500. Alternatively, you can build up to this goal over time with monthly payments.
So my fellow 20-year-olds, I challenge you to use your age to your advantage, take a risk, utilize your skills to research your options, step up your lifestyle and gain some knowledge. Before you know it, you’ll be spending less and earning more!
Have I convinced you that now is the time to start investing? Are you ready to be a part of the future of interesting? Register now with Carilend! Trust me, you won’t regret it.