Youngsters enjoy bashing around, maintaining high profile social lives buying whatever new gadgets, cosmetics and clothes that hit the market emptying their wallet on a shopping spree before the next payday. Life is a joy at that age especially when one starts earning. Instant gratification becomes so important with plenty of cash at disposal, no family to support, no mortgages, no installments and no worries. But soon they realize the need for saving and investing when they start thinking of a marriage that a series of questions arise – Isn’t it high time that I should start saving? What age should I start investing? After marriage? After the first kid? Should I start my retirement planning right now?
Marriage and the life after brings in more obligations and responsibilities which leave the free disposable money at hand shrunken day by day and one starts craving for salary hikes. The necessities are a lot then; a home, its furnishings, vehicle, a vacation, the endless list goes on. There you have the feeling that you should have started planning, saving, and investing very earlier. Yes, marriages could end up in a hell if your personal finance is messy.
So at what age should you start investing? You should start investing as early as you can. Why? Because to take advantage of the following factors.
Time for Compounding
Time is a golden factor for any investor. Money makes money! The more the time, the more the chances are for compounding money. Hence the early one starts saving and investing, the more the chances of multiplying money.
Timing the Market
In the mid eighties when I finished schooling, I remember the so called blue chip companies available at dirt cheap prices, but I hardly had any cash to sow and reap. The opportunities were more to enter and exit the markets and to scramble for undervalued stocks. Hence the earlier one starts, the more are the chances to benefit from the follies of the market swinging up and down.
Confidence Booster
Planning and achieving investment targets and objectives at a young age could boost your confidence levels with relation to your personal finance. Won’t it be a self confidence booster if you are able to meet your expenses on your own from your earnings and investments, without leverage or help from parents? As you get older and get entangled with family obligations, your confidence level dips and investment decisions can get procrastinated for ever!
Learning From Mistakes
All of us are prone to making investment mistakes. If you start early, you will have only little cash to invest. If you make an investment mistake at that stage, it wouldn’t be a costly affair than a mistake made years later with a large corpus of cash. If you start investing early, you have opportunities to learn from your own mistakes which otherwise happening at a later stage will make you reluctant to invest in the asset class that you made a mistake.
What can you do as a parent?
Parents should encourage business ideas, help developing leadership skills, teach living frugal, and guide their children in saving and investing right from young age. It doesn’t matter even if it’s from the age of 10 or below. If you find such traits naturally, encourage but don’t discourage. Encourage your kids to be financially independent at the earliest. Encourage them to invest, no matter whether it is into a business, bonds, stocks, or certificates of deposit; ultimately the goal should be to save and invest than to spend.
Since childhood I used to save in a piggy bank just to buy my favorite toys and is continuing until now to the age of 19. This is an eye opener really to initiate snowball effect of compounding my own money. Money makes money.
I now regret for having not started earlier. I remember the famous saying by novelist George Gissing.
Very much true. If spent/saved wisely, both time and money should fetch you prosperity. No doubt about that.