If you’re young, independent and have just started your first job, you are most likely enjoying the fun of doing what you wish with your own money. The concept of saving and retirement are probably farthest from your mind. After all, if the paycheck comes regularly and you’re having the time of your life, the concept of growing old usually takes the backseat.
But no matter how young you are, you should begin to invest your money. In fact, the younger you are, the better it will be as far as investments are concerned. The earlier you start with your investments, the more time you will give your money to grow. By the time you retire, you will have enough stashed in your nest egg to live comfortably even if you won’t have to work.
Even if you are still in college and are working part-time to fund your education, you can even start investing. If you start to invest when you are in college, you benefit from an investment cycle that spans 50 years—longer than 20 to 30 year cycle that those who wait until they are in their thirties or forties to start investing seriously.
Whether you’re a high school or college student or are a parent of one, here are some incentives for you to encourage yourself or your kid to start saving and investing money early:
You will be living on your own eventually.
If you are still depending largely on your parents for support, you’ll have to prepare yourself for the time when you won’t be able to do so. Unless you are assured that mom and dad are going to leave you with a substantial inheritance that will allow you to play computer games all day, now would be the best time to prepare for a life of independence. You may not realize just how expensive it is to pay for rent, car, gas, food, take someone out on a date, get married and send kids to school (eventually) but you better believe it’s going to be shocking—especially if you haven’t actually done these yourself. It’s good to be financially prepared, even partly, for these expenses.
Investing gives you the chance to fulfill your dreams.
Want to travel the world? Want to get a postgraduate education? How about a vacation house by the beach or a retreat in the mountains? Want to own the latest, fastest sports car? No matter which of these you choose (and more), they will be easier to acquire if you have money. We’re not saying that money alone can buy you happiness (because it can’t). However, money can give you a more comfortable life while allowing you to enjoy its little luxuries. Unfair though that may be, it’s the truth. So the earlier you start investing, the more money you’re likely going save up so you can actually do the things you want to do and fulfill your dreams.
You get the bragging rights of being one of the owners of a company.
When you buy stocks, you are essentially buying a share of a company. That’s why you are called a shareholder. As a part-owner, you share in the successes and failures of that company. If you’re young and just want the bragging rights, well, you have it. You can tell your friends that you are the owner of the firm that makes their favorite soda or that of their smartphone. But there’s more to company ownership than just mere bragging rights. If the company has had a good run that year, you get to enjoy the profits it makes as well, either through dividend sharing or a rise in the value of its stock. Of course, if it fails, your holding will also dip in value. But that’s one of the realities you have to face as a stockholder.
Before you invest in anything—whether it’s stocks, bonds, mutual funds, real estate or in your own business—you have to do your due diligence. That means research. You have to strive to know everything about the company you want to become a stock owner of. If you are starting your own enterprise, you’ll have to research not only on the product or service you want to sell but on your potential competition as well. This may seem like work initially but once you are at the stage when you realize that you’ll be putting your money on the line, it can be both exciting and fun to understand and later on, monitor, how your investments are doing.
But here’s the coolest part about the fun that goes with investing: You actually earn without having to work yourself to death. While you are watching TV, out on a date or listening to your professor lecture about amoebas, you know that your investments are earning money. What could be more fun than literally not working for your money?
Investing early teaches you valuable life lessons.
Investing is not just about money. Of course, that’s the primary motive behind your investment—you want your money to grow. But along the way, you’ll learn valuable lessons. One of these is not to panic. There will times when the market will dip, sometimes to the point of rendering your investments nearly worthless. However, the cyclical nature of the market tells us that it will eventually turn itself around so it’s not a good idea to sell your holdings when the market is at its worst. This is what many regular investors do and in the process, they lose a lot of money. Patience, knowledge and the capacity to stay calm even under the worst economic conditions is one important lesson that you can carry with you even to your personal life.
A lot of people mistakenly believe that investing is left to the financial professionals. That’s why they shy away from investing. They think that they need a lot of money because experts need to be paid for their services. They think that they need experts because they don’t know anything about investing.
Well, here’s an eye-opener for you: You can invest. For as long as you can read, write, add, subtract, divide and multiply, you can start your journey to the confusing but always exciting world of investing. Yes, you will need to brush up on your knowledge on the subject so you can understand the basics but you should not let your lack of exposure deter you from making your first investment.
As far as the money you need to invest goes, you actually don’t need much. You can start with just a hundred dollars to invest or even less. There are even brokerage houses that allow you to build your investment in increments for just a few dollars a month.
Here’s one important fact that you should also keep in mind if you’re afraid to dabble in the world of investing: No one, not even the most expert fund managers can beat the stock market all the time. That should tell you one thing: You are never guaranteed of high returns on your investments just because you chose a supposedly stellar manager. Yes, they may have the training and the tools needed to return value to their shareholders but they are also human and can fail. Don’t let your lack of education or experience deter you from making investments.
As a young adult, it’s easy to spend money on the latest clothes, the most fashionable bags and shoes and the coolest gadgets. However, you should always strive to keep the long term view in everything that you do with your money. Will that pair of designer shoes appreciate in value by the time you retire? Will you be able to sell your laptop at an even higher price than when you bought it when you need money? Apparently, the answer to both questions is no. If you invest your money, however, it grows so that barring any extreme economic and political problems, you’ll be able to draw on your nest egg when you are old and can no longer work.
It’s very easy to spend money. It’s even easier to swipe plastic and get in debt. However, in today’s uncertain economic times, it’s a bad idea to think only of spending without considering how it will impact your financial future. Spending without saving or investing is a sure road to a miserable retirement. Even if you have paid your Social Security taxes, you should never assume that the pension you will get will be enough to fund your retirement. It won’t and the government never intended it to be a retiree’s sole source of income.
If you want to achieve your goals and live comfortably, saving and investing will get you there. Don’t waste your youth. Learn what investing is and start investing today.
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