You’ve probably heard before that you should begin investing when your young, because you have more years ahead of you so that your money can compound for a longer time and you’ll be way better off financially in the long run. That’s absolutely true, but there’s also a less known reason for why you should begin investing at a young age. Now if you have kids, then I suggest that you give them a little bit of money to invest on their own.
Typical reason we’ve all heard about – you have more years for your investment nest egg to grow.
Let’s start off with comparing two people.
Joe begins investing at age 35 with $1000 and with an average 10% year over year return, he has $10,830 by the time he’s 60.
Tom begins investing at the age of 15 also with $1000 and with an average 10% year over year return, he has $72,890 by the time he’s 60.
This is quite logical. The earlier you begin investing your savings or funds, the more time your money has to compound and grow.
The little known reason – you’re making mistakes and learning with a smaller amount of money.
Let’s face it. All investment newbies start off making many mistakes. We sell at the wrong times, buy into the wrong investments, etc. When you begin investing at a young age, you’ll most likely just invest with a few hundred dollars (because all you have is a few hundred dollars). That means that the maximum you’ll have to lose is a few hundred dollars. Think of those few hundreds are your tuition fee for investing 101.When you begin investing at a later age (such as your thirties or forties), you’ll probably have thousands if not tens of thousands of dollars to invest with. And since all investors start off as newbies, the guy who’s thirty or forty will probably lose thousands of dollars in the beginning. As you can see, those who begin investing at a young age pay a much cheaper “tuition fee” than those who start investing at a later age.
There is literally unlimited knowledge in the field of investments to be learned, and most of that knowledge can only be gained through experience. The younger you begin investing = the more time you’ll have to learn about it = the better off you’ll be financially in the long run.