What if I told you that you don’t have to wait until you turn 60 years old to retire? What if I told you that it is possible to achieve a net worth of a few million dollars at age 35-40? I know it sounds wild, but it is not impossible if you set up multiple income streams and manage your money well. In today’s society, people work tirelessly to earn their salary until they reach the standard retirement age, which is around 62-65 in the United States. The main reasons why most people work for many years is for money and maybe for the satisfaction of working, but most people really just work for the money. Many are stuck in this sort of “rat race” where they use their salary from their job to pay off liabilities and payments, which continues to constantly cycle as people earn money from their salaries and spend for their discretionary or necessary needs, while getting into significant debt along the way. If you are a teenager reading this, does this lifestyle sound enjoyable for you? Do you want to work until you reach your retirement age and not have time to do what you actually like to do, while life just zooms away? I’m going to go ahead and answer that question for you: that answer should be no.
The dream life for teenagers is to have a lot of money so that they don’t have to work forever, and have time to do what they like to do, such as pursuing their hobbies, travelling, etc. This is definitely possible to achieve if you start learning essential finance concepts at a young age to help you become financially knowledgeable and responsible. In this blog post, I will go over the benefits of start your financial and investing journey at a young age. The earlier you start, the earlier you can become rich and achieve your financial goals.
1. Compound Interest is Powerful
One of the biggest reasons why experienced investors recommend to start investing as early as possible is because of the advantage of compound interest. In simple terms, compound interest is the interest earned on the interest. Here’s a great example from hermoney.com of how compound interest works in real life:
Sarah (20 years old): invests $1000 today and continually contributes $83 a month
Jim (30 years old): invests $1000 at 30 years old and continually contributes $83 a month
James: (40 years old): invests $1000 at 40 years old and continually contributes $83 a month
In this scenario, by age 70, Sarah would have $465,000, Jim would have $225,000, and James would have $105,000. As you can see, taking advantage of interest and contributing a small amount to investing at an earlier age can allow you to generate more money by the time you retire.
2. Develop a Higher Risk Tolerance
When you’re younger, you don’t have much to lose, which is why starting to invest and learn about personal finance at a young age is optimal. You tend to have a relatively high risk tolerance when you’re younger as compared to adults. This does not mean to just gamble and invest into stocks or assets just for the thrill of it and lose all of your money. However, if you take the time to really learn these essential financial skills early, then you can start to experiment and begin developing important personal finance habits and investing skills. This becomes harder when you’re an adult because you have a lot more responsibilities and losing big could be devastating for you, especially if you don’t have any clue on what to do. Additionally, you will have more time to ride out the financial recessions, which can allow you to have some experience on how to overcome recessions and still make profits even when the economy is down. Starting early is an advantage because you have years to study the markets and refine your investing strategies, while also allowing you to develop a higher risk tolerance. With the amount of experience you get from learning through online courses, reading books, and actually putting in money to invest, you can become very experienced and you’ll start to see the various patterns and techniques.
3. Great Experience
If you really want to become an experienced and wealthy investor, you need to spend years investing and learning. A world-class painter does not magically become one after painting one piece of art, but spends a lot of time perfecting all the strokes. A soccer player, like Lionel Messi does not become a world-class player in a day, but puts in the effort to practice and improve themselves. This applies to investing as well as you need to put in the time to develop that experience. When you’re young you don’t have as much responsibilities except school assignments, which makes it the perfect time for you to learn investing and personal finance. If you wait until you’re older, than you may not have enough time to really practice and become experienced. Additionally, investing and learning personal finance allows you to also learn how to manage time effectively, especially when you have to allot time slots to invest and carry out your personal responsibilities. As an investor, you learn that consistency is key in order to generate wealth. You don’t want to solely focus all your time on investing, and likewise, you don’t want to solely focus on your personal responsibilities and jobs. That’s where time management comes in, and when you start young, you can develop that understanding earlier.
4. Early Retirement
Early retirement is a huge benefit of starting to invest early. It may be hard to think that far in advance into the future, but trust me, starting now at a young age will only benefit you in the future. And why wouldn’t anyone not want to retire early? Who wants to work for their entire lives? Early retirement allows one to spend quality time with your family or do what they love to do, such as travelling, reading, writing, and even investing. Don’t be one of those people that think it’s early to start because it’s never too early. Don’t wait for your friends to actually begin planning your future. You are the only one that can control what you want to do, so why not just do what you like to do? Why follow what others do? Have a determined mindset, set high goals, and start early to generate that wealth, allowing you to retire early and having a lot of time just for yourself.
Excite The Mind 