Investing while young is a habit that we as a society need to inculcate into our youth. It is not enough to let the youth figure it out on their own. We need to be providing youngsters with formal education not only about the importance of investing early, but the actual hands on mechanics of how to invest wisely.
What are the advantages of investing early?
First and foremost, investing while young affords you a much-needed head start, which is critical to maximizing the benefit of allowing investments to grow over time. When you start investing while young, you have more time in your life to allow your investments to grow, thanks to the benefits of compound interest, and allowing your investments to grow and increase in value.
Another advantage of investing while young is that you have more time to recover from your mistakes. If you end up losing some money in the market, you have more time to recover before you will actually need the money, if you are investing for the long term.
Furthermore, investing in your earlier years affords you the flexibility of being able to take riskier investments. If you lose a lot of money when you are young, you have plenty of time in your life ahead of you to recoup from your losses and rebuild your portfolio. But if you are older, then you may be much less risk averse, since you can’t afford to lose money, and you have less time on your side to recover from your losses, before you will need to cash the money out of the market.
Plus, investing is a learning process, so investing while young gives you more time to learn from your mistakes, and to set goals for yourself that you can achieve later in life. Investing while young, if done properly, can mean that you will have a better quality of life as you get older. If you fail to invest properly in your youth, the quality of your life may actually decline in later years, since you will not have built up your retirement nest egg sufficiently.