You must have heard that the early bird gets the worm. Well, investing is no different.
The earlier you start investing, the more time your investments have to grow and compound. It's crucial to understand the benefits of starting to invest at a young age for long-term goals.
6 reasons you should begin investing early
- Time is on your side
One of the most significant advantages of starting to invest at a young age is time. The longer your money is invested, the more time it has to grow and compound. Compounding means you earn interest on both the principal amount and the interest accumulated over time. The longer your money is invested, the more time it has to earn compound interest. It can significantly increase your wealth over time, and you will have a pretty large corpus.
- Build a solid financial foundation
Investing early in life can help you build a strong financial foundation for the future. By investing consistently over time, you can accumulate significant wealth to help you achieve your long-term financial goals, such as buying a house, saving for your child's education or retiring comfortably. Starting to invest at a young age can give you a head start and help you achieve your financial goals faster.
- Baby steps to big dreams
Any of your dreams, buying your favourite car or going on a luxurious vacation, can be achieved with lesser investment, provided you start early. Let's take an example. Say you want to buy your dream car after 7 years, and the amount you need for it is Rs. 20 lakh. et's assume that you opt for equity funds for this investment which may give approx 12% returns in the long run. To hit the target, you would need to invest ₹15,000 per month, which will take the total invested amount to ₹12 lakh.
Now take another scenario where you start investing for the same goal 2 years later. To achieve the desired amount, you will have to now invest ₹25,000 every month. Your total investment will shoot up to ₹15 lakh !
- Disciplined spending
Once you start investing, it gives a structure to your expenses. We live in a consumption-oriented world, meaning thousands of options that need spending on our part keep staring at us all the time. And more often than not, we tend to give in. But if you pick up the habit of investing early on, your spending on not-so-essential things will automatically reduce. For instance, your monthly salary is ₹50,000, and you commit to investing ₹10,000 every month. It will leave you with less money for discretionary spending.
- You can take risks
With lesser financial responsibilities, you can easily go for riskier investments that tend to give higher returns than other safer options. Say you go wrong with it. Then also you have ample time to rectify the mistakes and recover in the future.
- Learn valuable lessons
Investing early can also help you learn valuable lessons about money. As a young investor, you will have the opportunity to learn about the basics of investing, such as diversification, asset allocation and risk management. You can also learn about the different investment options and how to create a long-term financial plan. By starting to invest at a young age, you can gain valuable experience and knowledge that can benefit you throughout your life.
Starting to invest at a young age is essential for long-term financial planning. It can give you time to grow, compound your investments and help you build a strong financial foundation.