Investing is a learning process for most of us. That’s why we rely on those with years of experience to guide us on this journey. Chris Linkas is part of a UK-based investment group that says starting young has huge effects.
Albert Einstein once said that, “Compounding is the eighth wonder of the world.” Why is that? Chris Linkas says that starting young allows benefits in many areas. Compounding is the biggest benefit of starting young. In simple terms it means that as your money starts to grow, you make money on the money your making! How great is that? Over the period of your working years this could add up to hundreds of thousands, if not a million dollars.
A 25 year old who wishes to accumulate $1 million by age 60 would need to invest $880.21 each month assuming a constant return of 5%. A 35 year old wishing to accumulate $1 million by age 60 would need to invest $1,679.23 each month using the same assumptions. In this example you can see that starting young requires less capital per month than if you started 10 years later!
When you are young, you have more time for volatility. You can ride the high’s and low’s of the market. You also have time to study and learn over the years as well.
Another huge benefit is if you work for a company that provides a match in a 401k and/or Roth IRA investment. Companies match in varying degrees and amounts. For example a company that will match what you put in up to 4% means they will literally double the amount you put in up to that percentage resulting in 8% in total (http://reporterexpert.com/chris-linkas-talks-to-millennials/). Who doesn’t like free money! If you are fortunate to work for a company with profit sharing benefits this compounds this even more!
When young, money is usually tight, that’s why budgets are important. That doesn’t sound fun but putting together a budget will show you where your money is going. Linkas thinks you will find out that there is some money there to get started and to begin taking advantage of your capital at a young age.