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Start saving money when you’re young. If you wait, it’ll get hard to build wealth over your lifetime. Keep reading to learn why.
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Over the course of your life, you are likely to get a ton of financial advice. People will have opinions on everything from what kind of car you should buy to what credit card to use to how much you should spend on a house.
A lot of this advice will be good, and you can take whatever tips make sense for your lifestyle and incorporate them while disregarding other rules of thumb that may not apply to your situation. But, if there is one single piece of financial advice that you absolutely, always should follow, this is what it should be.
Everyone should follow this advice without question
The single most important piece of financial advice that everyone should follow is to start investing at a young age. And the reason for that is, when you begin investing early, it becomes tremendously easier for you to build wealth through investing.
See, here’s what happens. You put some money into the stock market, and ideally that money will grow. Say you make a 10% annual return and you invested $1,000. At the end of the year, you would have $1,100. Even if you didn’t put in an extra time, you’d be investing $1,100 in year two. So, now you’d earn a 10% return on $1,100 and would make $110 in year two instead of $100. This is called compound growth.
If you have many years for this to happen, you can easily see how quickly the numbers will start growing. Your returns can be reinvested again and again, turning into an effortless money-making machine, even with no additional contributions from you. The power of this can be tremendous, especially if you start saving when you are as young as possible.
When you put your money to work for you over many, many years, you simply do not need to work nearly as hard. And that can make all the difference in terms of whether you accomplish financial goals without a lot of stress.
Just how big of a difference can starting early make?
To understand how profound an impact an early head start can have, consider what would happen if you wanted to have $1 million at the age of 65 and you expected to earn 10% average annual returns.
If you began investing at the age of 25 and had 40 years for your money to grow, you would only need to put a small amount of money into your brokerage account — about $188 a month. But if you instead put off investing until the age of 40 and had 25 years for your money to grow, you would need to invest $847.33 per month. That is likely a lot less doable for many people.
You may already be older than age 25. But, you are not ever going to get younger than you are right now. So don’t wait. Start investing today and get compound interest working for you. You owe it to yourself to have your money start making money so you can have the financial security you deserve.
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