It’s amazing the importance and impact that investing when you are young has on your future. It is unbelievable how much the little investments we make now can sculpt our future 20, 30, 40 or even 50 years from now.
It doesn’t matter how much, as long as you are investing
There are a million reasons and excuses that we make as young people to not invest, bills, credit cards, car payments, the list goes on and on. What really matters is that we start investing at least something when we are young, the amount you invest is up to you.
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Make regular investments
A key to investing is to make regular scheduled contributions. Whether it is savings, IRA, 401(k), or stock, you need to make it a goal to regularly invest money that you have no intentions of touching until many years down the road.
Online banking makes it easy to schedule weekly or monthly transfers to your savings while companies like ShareBuilder make it extremely easy to open and contribute to stock and IRAs.
The impact of investing young
As almost all investors and financial analysts will attest, the greatest asset that we have on our sides is time. We have the benefit of decades of compounding and returns to build our future. The fact that we have so much time allows us to build our future exponentially greater than those who have less time to invest.
For example: Imagine that you start investing when you are 25 years old. You contribute $2,500 per year to your IRA (which is roughly $50 per week). We will assume a very conservative 5% annual return, below is the amount that your money will grow, by contributing only $50 per week:
- 1 year = $2,730
- 5 years = $14,858.69
- 10 years = $33,758.75
- 15 years = $57,880.55
- 20 years = $88,666.76
- 25 years = $127,958.62
- 30 years = $178,106.11
- 40 years = $323,793.39
- 50 years = $561,102.63
It’s amazing the growth that can be achieved through time and compounding. In the example above after 50 years you will accumulated over half a million dollars although you only actually contributed $130,000 total.
