By Mrs. Manalee Verneker
Investing contributes to your wealth growth and ensures long-term financial security. You can create additional income streams by choosing the right investment avenue. You can achieve life goals like buying a home, funding your child’s higher education, or building your retirement corpus. Whenever we think about investment the first question that arises is where to invest and how to start.
We are usually advised by financial experts and influencers who share insights on starting early. But young people don’t think they have enough money to invest. Once they begin working and earning their first salary they are more attracted to investing in the latest gadgets, vehicles, or just spending on wants rather than focusing on their needs. That leads to delaying their investments.
When asked about starting early, every individual would have one question in mind. Why do you need to start early? Why do you need to Save? Why can’t you just Spend? Why do you need to Invest?
Let’s answer a few of the questions:
- Starting early leads to the Power of Compounding: Compounding means earning interest on your interest including your principal amount. The power of Compounding accrues like magic over the long run, eg. If you start investing Rs. 2000 every month from the age of 25 and continue investing till the age of 50, your principal amount of Rs. 6 lakh would grow to Rs. 37.16 lakh by the age of 50, assuming an annual return of 12% compounded yearly. If you continue investing till your age of 60, your principal amount of Rs. 8.4 lakh would grow to Rs. 1.25 crore. That’s the magic of the power of compounding.
- Boosts your risk-taking ability. The best time to start investing is in your early 20s. Research shows that younger investors are more willing to take risks than older investors. Adult investors are generally conservative, preferring stability while avoiding risky investment vehicles. There is an old saying, “The greater the risk, the greater the reward.” A higher risk appetite increases the chances of getting decent returns at a young age.
- You can plan for early retirement. When you start your investment journey early, you can retire early in life if you wish to. This is because by around age 50, you may have accumulated enough wealth that you may no longer need to continue working. This luxury may not be achievable if you start your investment journey later in life.
- The time value of money increases over time. Regular investments from an early age can pay off big in retirement. In addition, investing early makes it easier for you to enter the world of finance early on. Your money will grow over time. Thanks to your early investments, at this age you can afford things others may not have. This puts you ahead of others who prefer to invest later in life.
- Tension-free secured future. There will be times in your life when you desperately need money to cover unavoidable expenses. In such a case, the investments made at an early age can prove to be very useful, and you can survive difficult times on your own. The need to borrow money from others is dramatically reduced by early investment.
- Improves your spending habits: When you start investing early it becomes a habit in the long run. Without investment, a lot of earnings could get diverted toward unwanted expenses. It helps you identify your financial goals and create a road map to achieve them. It also helps you curtail unwanted expenses or impulsive buying.
- Secured Future: Starting early can help you achieve your financial goals i.e buying your dream home, car, foreign trip, financial freedom, planning your child’s higher education , etc. Wealth is very crucial for fulfilling your life responsibilities, planning for contingency, and achieving your life goals. You can also experience the power of compounding.
By investing early in life, you can learn patterns of financial independence and discipline. Early Investing will teach you the true difference between investing and saving. You are never too young to invest, so never think that your young age is an obstacle to starting investing. A small amount of money invested now will put more money in your pocket in the future. You can always seek an expert opinion to choose the right investment method.
About the Author:
Mrs. Manalee Verneker is the founder of Financial Wisdom, a privately established financial services firm based in Margao, Goa. Financial Wisdom was founded by her in 2021, after just less than a decade of experience in the field of personal finance. She is a Certified Financial Planner (CFPCM) from the Financial Planning Standard Board India and a Chartered Wealth Manager (CWM) from the American Academy of Financial Management.
Her experience includes working in Mutual Fund Companies, Wealth Management, and Financial Planning Companies and she has a good understanding of both Indian and International markets and products. She is passionate about personal finance management, and financial literacy and is a strong advocate of financial advice that focuses solely on the individual.
She can be contacted on:
WhatsApp: +91 8378080888
Email: [email protected]