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Don't Wait Until You're 30 To Start Investing

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Don't Wait Until You're 30 To Start Investing

When you’re young, retirement seems like a lifetime away. However, in reality, the financial decisions you make in your 20s have a much larger impact on your financial security laterIin life than you may think.

Time is Money

It may seem like there is no big difference between beginning your retirement saving at age 22 or age 30. However, the numbers show that those eight years fresh out of college make a huge difference later in life. It’s not just the principle savings you set aside during that time that add up—it’s the compounding returns on investment.

The Numbers

The U.S. stock market has an average annual historical return of around 7%. Assuming that 7% rate of return, here are some numbers that highlight just how important your 20’s can be. If you start investing $5,000 per year at age 22, you will have accumulated $543,246 for retirement by age 52! However, if you wait until age 30 to start investing, you will only have saved $284,333 by age 52. That’s barely half of what you could have saved if you had started earlier!

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Wall Street can seem extremely intimidating to a young investor with no experience, and it’s true that there are plenty of terrible investments out there that can do more damage than good to retirement savings. However, it’s never too early to begin learning about investing. If you plan on retiring, you’re going to have to get comfortable with the investing world at some point, so why not go ahead and do it while you have more time for your investments to grow?

Tips For Early Investing

Regardless of your age, here are some helpful tips for any new investor that may help keep you from making any big irreversible mistakes during the learning process.

1. Pay off debt. Before you make a single investment, make sure that all debt, especially high-interest credit card debt, is paid off. Every cent you pay in interest is money that is coming out of your retirement savings until your debt is paid off.

2. Have a plan. Educate yourself about what returns are realistic, how many years you have until your preferred retirement age and how much annual contribution you need to make to get to your goal.

3. Choose the right investments. Some of the risk of the stock market can be mitigated through diversification, and an exchange traded fund (ETF) is a great way to diversify without all the fees associated with buying individual stocks.

Stash, for example, is one resource with a range of “I believe” investments that allow investors to avoid hundreds of dollars in trading fees and invest in stocks they believe in all at once by buying a single ETF.

Posted-In: Trading Ideas Best of Benzinga

 

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