Top 5 Reasons Why You Should Invest at an Early Age

Jul 29, 2021

“Opportunity is missed by most people because it is dressed in overalls and looks like work.” The statement uttered by American businessman and inventor Thomas A. Edison may as well apply to majority of people who miss the chance to save and invest early.  Fact is, many “adult” things can be scary for young people, and that includes taking risks, investing money and failing.

Youth is when most young people are enjoying lots of stuff, and many save and spend mostly for day-to-day needs, or coveted items like gadgets, apparel, food, and recreation. A question like “What should I invest in?” may still be far from mind. Yet there are a few motivated individuals who are willing to explore and experience the thrill and power of investing at a young age.

Young people starting to invest before they reach their prime is something to be commended. For a thousand others, though, being left alone, not being “pushed” into something they know nothing about, or simply chilling out may seem a  whole lot better.

Whether a person is taking a leap of faith, driven by a goal, or beginning to invest because of fear of missing out, investing while young may be instigated in many different ways. The important thing is to get started in investing money beyond letting it sit in a regular savings account.

Many people think the best ways to invest money young may be by entering the volatile stock market world, investing on tangible things like fine jewelry, a vintage car, property, or a high-risk asset class like cryptocurrencies. On the other hand, there are also alternative options, like peer-to-peer investment.

Benefits of Investing Early

Determining “where to start investing” or “should I invest now?” is hinged on certain factors. Some people conversing in chat forums show interest in popular investments for young adults, particularly cryptocurrency. While some young people who desire to invest early are still requesting to be pointed in the right direction, others are sharing good advice already, like saving more money before properly starting to invest, and never investing more than one can afford to lose.

The above scenario illustrates one of the benefits of investing young. Gaining lots of practical insights – like ‘how does investing work’  and ‘where to put money now’ —  and learning strategies that may lead to making more money in the long haul can be gleaned by investing early vs late. There are many other advantages of investing at a young age. Here are top five reasons why it pays to be an early bird when investing money.

  1. Time is on your side. The fact that a person can use youth, and the power of compounding returns to put aside a few hundreds or thousands that can gradually accumulate over the years, are among the top reasons why you should invest at early age. Young people, barring unforeseen circumstances, are generally blessed with more time to learn and recover from their losses. 

Investing early or while young is favorable because there are decades for even small amounts of money to grow. Investing in your 20s creates more time for your investment to grow in value. By investing at a young age, over time, when you reach your prime, or mid- to late adulthood, chances are, your annual salary will be outpaced by your investment earnings.

The knee-jerk reaction of some young people may be to say that it can be a drag to be thinking “how does investing work” or “what should I invest in?” A seemingly ‘boring’ investment idea, though, can lead to myriad benefits in adulthood. Starting to invest early for retirement increases the benefits of compound interest. The end-goal may or may not be retirement savings. It may be the intangible rewards.

  1. You’ll be prepared for unforeseen circumstances. Stuff happens, even to the best of us, so it is important to “make hay while the sun shines.” Most young people have less financial obligations, so it makes a whole lot of sense to realize and grab the advantages of investment early on. The future may seem hazy for teens and twentysomethings now, and things like the perils of a huge pile of debt may be non-issues. Nonetheless, being prepared by having an emergency fund can save your sanity later on.

Early investment facilitates entry into the world of finance, and the exposure creates positive ripple effects. Moreover, your money grows with time, so if you begin investing in your 20s, you can afford things your peers cannot get at the same age. More importantly, you will be better prepared to mitigate risks, which is a benefit of investing with foresight. To be more informed when still figuring out how to invest your money in your 20s, learn from seasoned investors who can answer that one question in your mind: What should I invest in?”

  1. You accumulate knowledge and techniques. A knowledgeable person is like a tree with roots, there is an anchor or source of strength. If you are part of the current generation of high school or college students, investing early has clear payoffs. Although investing at 18 may be fine (but not below that age since minors below 18 must still go through custodial accounts supervised by adult family members or companions), being armed with knowledge is crucial.

They may largely be undecided on when to start investing, but most young people nowadays are tech-savvy, so certain investments become easy to learn. In the digital age, organizations (including banks) are looking at ways to use data and deploy tools to help customers manage their money better. Among the smart investments young adults gravitate to are those conducted online.

With sufficient knowledge and/or digital tools, most discerning individuals can banish misconceptions, and see through hype.  Consider for a moment why lots of young people have risked their spare funds and placed their bets on certain cryptocurrencies. The answer is because they can invest more on their own terms, sans a mind-boggling formal financial education. Other young investors will also know how to space out their money or devise a good overall game plan, like diversifying their investment portfolio.

  1. Financial freedom. Investing while young lets you leave financial regrets behind, and still have lots of time to start anew. By learning the tricks of the trade, or uncovering the many different types of investment options, a person can turn years od savvy investing into regular cash flows. The problem is that some young people may be clueless and broke, so saving first and doing one’s homework are essential. Spending on unnecessary items needs to be curbed.

  1. Peace of mind. Establishing money-saving habits early in life can make an enormous difference in later years. Learning how to invest young and growing one’s money can prepare a person for major life stages like getting married and raising a family. A contingency fund contributes to peace of mind, for single individuals, married with kids, or those who are advancing in years. Certain investments can afford huge peace mind while generating moderate gains, owing to transparency and the automated process. That may be a primary reason why you should invest.

Lending people money through an online peer-to-peer funding platform is among the best investments for young adults. Young investors can shell out small amounts at first, stay invested (or reinvest), and reap above-market rate of return. Peer-to-peer lender, which facilitates fast, easy, and hassle-free online loans and financial services, can let young and mature investors earn as much as 30 percent per annum. Know the rewards, lessen the risks, and experience ease and peace of mind by investing money now.