Financial stability is what everyone strives for, and it usually begins in youth, from lemonade stands or Girl Scout cookies when you’re a kid to part-time jobs when you’re a teen up until your early 20s. Understandably, making investments isn’t something most people look at until they have achieved financial stability. A great takeaway from Black financial literacy is that being around twenty-something years old is an ideal time to start investments. Yes, this is even if you have a low salary and student loans.
Here are some of the reasons why making investments in your 20s is advantageous:
You can afford to take more risks
How old an investor is has direct influence on just how much risk they will be able to handle. People in their 20s can take on more risk since they have several years ahead of them. Investors who are closer to retirement age tend to favor risk-free or low-risk opportunities, like certificates of deposit or even bonds. The younger set will be able to have portfolios that are more aggressive and possibly more at-risk.
You have a lot of time
It’s understandable that you’re probably on a very tight budget. However, what you do have an abundance of is time. Compounding, according to Albert Einstein, is “the eighth wonder of the world.” This is basically helping an investment grow through any earnings you make being reinvested. Using compounding means that you will be able to generate earnings over the weeks, months, and years. All you need is to reinvest earnings and, well, time.
The math goes like this: if you invest $10,000 at 20 years old with an interest rate of 5%, you’ll end up with $70,000 at age 60. Made when you’re 30, that investment will give you approximately $43,000 instead at 60 years old. Essentially, the more time money gets to be able to work, the more earnings it will generate in the long run.
You will learn through experience
There is a lot that goes into investments. As previously mentioned, when you’re in your 20s, you have a lot of time. The learning curve can be a pretty long, steep road. You can reach out to financial advisors for help, but of course, everything is ultimately up to you. As the months and years go by, you will be able to better study various markets and craft your strategy for investments.
Your digital skills and knowledge will come in handy
Technology is continuously advancing, but the youth are constantly able to keep up. You will be able to use the internet for research and study on investments. Moreover, there are actually trading platforms online, and techniques as well as tools for it. There is a wealth of knowledge that young investors can tap into through online means.
Most people assume that the best time to invest is when they’re financially stable and somewhat older. The prime time to invest is actually in your 20s. You have the gift of time and digital literacy on your side. Moreover, the earlier you invest, the more time your investments have to grow.
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