I didn’t start really investing my money until I was almost 30 years old. During my twenties, I had my reasons for staying out of the stock market. I was trying to pay off the educational debt I’d racked up, build myself a nice emergency fund, and save up to purchase a home.
As such, holding off on investing wasn’t necessarily irresponsible on my part — it was just something I had to do to meet other pressing short-term goals. But had I started investing five, six, or seven years earlier, I’d have a lot more money to my name right now.
Meanwhile, there are plenty of people I know who didn’t start investing until they were almost 40. And it’s these people I’m sort of worried about, namely because they lost out on many crucial years of building wealth for retirement and other milestones.
That’s why the best investing tip I can really give anyone is to start putting your money to work as early as possible, even if it’s just a small amount. Investing from a young age could spell the difference between meeting your financial goals or falling regrettably short.
Time is your greatest tool
It’s true that in order to build wealth, you need money to invest. And you may not have a ton of it earlier in life, when you’re first building a career and trying to establish yourself as a functional adult.
But the reality is that pushing yourself to invest from a young age could change your financial picture substantially. And if you don’t believe me, let’s look at some numbers.
Let’s imagine you start investing at the age of 35. You put $300 a month into a brokerage account or retirement plan and load up on stocks, thereby generating an average annual 8% return, which is a bit below the market’s average. After 30 years, you’ll have almost $408,000 to your name. That’s not a small sum by any means.
But watch what happens if you start investing that $300 a month just 10 years earlier. If you give your money 40 years to grow instead of 30, you’ll end up with around $933,000, assuming that same average annual 8% return.
That’s more than twice the sum you’re looking at with a 30-year investment window. But notice that you’re not putting in twice as much money. Investing $300 a month for an extra 10 years means putting in $30,000 more to end up with $933,000 instead of $408,000. And that’s a pretty good deal.
Don’t wait to start investing
If I could have a redo of my twenties, I’d make a point to invest some money — even a small amount — to benefit from the power of compounded returns. But alas, I can’t go back in time and invest money I never put to work.
What I can do, however, is encourage others to start investing from the moment they’re able to enjoy a steady paycheck. Going that route could make a huge difference in your finances, as evidenced by the numbers above.