- You Save More
The simple fact is that if you start saving early, you will likely be able to save more. You have more time to put money away. If you hope to have half a 10-15 Lakhs by the time you are forty, you’re much more likely to reach that goal if you have been adding to your investment for 20 years vs. 5 years.
It also gives you a cushion if you stop contributing to your investments at some point. For example, if you begin investing at age 15 (with your parents’ guidance) but then find at age 25 that you can’t continue to make the annual contribution due to employment difficulties (not an unusual scenario) you have the cushion of ten previous years of investment to help you stay on track.
- Habit-Forming
Many people would like to invest but never quite get around to it. Why? This is because they are not in the habit of setting aside the money (however small an amount it may be). It seems like more a challenge to put away even a few thousand dollars a year. But, if you have been steadily putting away money annually since before you really made your own money, it becomes second-nature and you don’t question your annual contribution. This helps you avoid the temptation of giving up your investment dreams in order to have more disposal income right away. You’re already geared to view things in the long run.
- Potential for Ending Early
The earlier you start, the earlier you will be able sit back and enjoy the money you have set aside. For example, if you start when you are forty, you will likely be putting away funds until the retirement age of 65 (or higher). But, if you have been investing since you were young, you may have enough to take an early retirement, leaving the workplace as young as 40 to 50 years old.
- Developing Skills
As investing requires bit research before you put your money into it, It develops couple of skills like Technical and Fundamental analysis, Risk management, Portfolio management etc. Also it grows your decision making ability at early stage of your life.
- Power of Compounding
Compounding is the multiplying effect of earnings on earnings. The basic idea is that you should reinvest any interest or dividends your investments earn. You will then earn new interest on the earlier interest. When you repeat this cycle over and over through the years, your original investment will grow with surprising speed!
You can easily see that the earlier you start investing, the longer you will be in the game. Time is the secret ingredient in compounding. The more time you have to invest, the wealthier you will be.
- Things to Remember
One thing to remember when investing young is that you have time and the long term results are what matter. Do not sacrifice the long-term because you think there could be big returns in the short term, or you could risk losing everything. Also, make sure you consult a reliable financial advisor, since a young person with money may be an attractive target for less scrupulous individuals. If you are under 18 years old, you should definitely consult with your parents. Still, there are gains to be had from investing young, so be careful, but don’t be discouraged and invest wisely.
