Life Wealth

Why You Should Start Investing Early

By Nest Wealth on 27/04/2016Article 4 Minute Read

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Last week I wrote about the benefits of managing your personal finances now so that you can worry less about them later, and there’s one point I want to emphasize this week: investing early.

Having the advantage to grow your investments over time, and putting your investments to work for you, will help you live the life you ultimately want to. If you’re already investing your hard earned dollars, I applaud you for being on the ball! If you’re not already investing, don’t worry – I’m not judging you, I simply want to help you understand why you should be investing as early as possible.

If you’re sitting there thinking, “this won’t apply to me because I have no investments, and it’s too late to start now,” I’ll tell you something – you’re flat out wrong. It’s never too late to start investing. Here are 5 reasons why you should start investing as early as possible:

1. By not investing, you’re missing out on opportunities – like compounding returns.

Every day that passes uninvested, is a day you’re missing out on compound returns, and that is a crying shame! Making regular investments in a retirement account or an investment portfolio can lead to many compounding benefits.

Forget what compound returns are? Here’s a refresher – according to Investopedia, the compound return is the rate of return, typically expressed as a percentage, which represents the cumulative effect that a series of gains (or losses) have on an original amount of capital over a period of time.

2. You can improve your spending and saving habits. 

Investing early will help develop positive spending habits earlier on because it teaches important lessons about budgeting, spending, and saving. The earlier in life you learn those lessons (or your kids, if you happen to e-mail them this article – hint, hint), the more you will benefit. People who practice investing early are less likely to overspend or be careless with their money in the long run.

3. Time is working in your favour. 

Your biggest asset is time. Even if you’re just investing in retirement savings, nothing is going to make up for compound interest.

Also, if you lose any money in the market, investing early gives you more time to make it back – before you actually need it.

4. Give inflation a run for your money.

On average, inflation decreases your money’s value each and every year. You need your money to grow fast enough to outpace inflation, and for most, investing is one of the only ways to keep up with inflation.

5. Retirement will be less scary for you. 

Today, many boomers are facing a rather large problem – they don’t have savings for retirement, or what they have saved is simply not enough. If retirement were around the corner, having no investments could be an issue, however, if you start investing early enough you could avoid making impulsive decisions when you’re nearing retirement.

Also, the quality of life during retirement will also benefit because you’ll have a larger nest egg, and less stressors.

Investing at any age isn’t easy, but waiting to invest for when it’s convenient isn’t the best approach (because it’s never going to be easy). Don’t fall into the I-need-a-lump-sum-of-cash-to-start-investing trap – start small, with whatever you can afford to invest today because it’s most likely going to be worth more tomorrow.

Keep in mind, the market goes up and down, much like our emotions, and that means sometimes your investments will fail. Still, in the long term, investing early and giving your investments time to mature will help you come out ahead.

Finally, you don’t have to be an expert to invest. Find yourself a traditional advisor or a robo-advisor that will do the legwork and guide you.