You are never too young to start investing. In fact, the sooner you start, the better your results will be.
At EstateGuru we often hear a lot of discussions about investing among young people who are both positive and worried. On the one hand, everybody understands that if you start investing early, you have the chance to build up your portfolio and earn some extra money or even get more income than in a regular 9-5 job. On the other hand, there is still a lot of uncertainty about whether or not investing requires a lot of capital to get started and if it’s actually doable to start building your investment portfolio while just starting out in your adult life.
In this article, we will try to clear up the confusion with four reasons why you can start investing at an early age.
- Flexibility with your money
If you just started living away from your parents and got your first not so well paying job, you probably think that you have a lot of responsibilities and financial obligations, but let’s be realistic, you are still a lot more flexible than you will be when you start your own family and have kids. So it is probably easier to start saving when you are the only one who is dependent on your budget. You can read hundreds of articles on the internet about how skipping one take-away coffee a week or limiting your party budget can leave you with a good amount of spare money, so why not try?
- Building good financial habits
One thing that you probably didn’t learn in school is good financial habits, and there is no doubt that it is easier to form them when you just start to have your own income and plan your budget than after 10 years of living from paycheck to paycheck without a plan for your expenses. Investing can help you to form disciplined spending habits, the ability to plan your budget monthly and achieve your goals. This is true whether you want to retire early using your investment earnings or save up for some bigger purchases like a car or real estate.
- Compound interest
You have probably already heard about the power of compound interest, and this also answers the question of whether it’s worth it to start with smaller amounts rather than waiting a few years until your income is bigger and then start with bigger amounts.
Let’s take a look at EstateGuru investors. You can start with a 50 EUR investment and the historical average return is 11.6%. Now let’s see what happen in 30 years time when you (A) start at age of 20 and invest 50EUR per month and (B) when you start age of 30 and invest 100EUR per month.
As you can see – even though you will invest double the amount in option B, you will still end up with smaller future value. So it’s perfectly fine to start small as long as you start early!
While your investments are small and you are young, of course, you are also more flexible in risk taking, although we would recommend you don’t invest money you’re not willing to lose in speculative ways. Always do your own due-diligence when choosing investment options and make sure that they are not risky.
4. The goal of the 21st century – financial freedom
If you are reading about investments or any kind of financial planning activities, you probably have heard about financial freedom and how it’s the ultimate goal – retire early and support yourself through income from investments made over the years. And yes, it’s not impossible, in fact, you can already see in the graph of compound interest that even if you invest small amounts you end up with a decent size portfolio after 30 years.
And if you aim to achieve financial freedom in your life, you have your answer why you should start investing early – the sooner you start, the sooner you will achieve this goal!
At the end of the day, all you need to know is this – if you start investing now, there is no scenario of you failing – you will gain important skills for life, and develop healthy habits that can lead you to a wealthy life.
If you are interested in property backed investments – at EstateGuru you can start small and end up with an amazing average investment rate of 11.6%.
All investments, including real estate, are speculative in nature and involve substantial risk of loss. We encourage our investors to invest carefully. We also encourage investors to get personal advice from a professional investment advisor and to make independent investigations before acting on information that we publish.