Being young might make you feel that the world is endless. You are free to do whatever you want, and you don’t have to worry about paying bills and mortgages. But in this day and age, that is not the case. You should lay a stable foundation for a smooth sailing financial future, especially in Australia, where the economy is one of the freest in the world.
That said, here are the reasons why young Australians should invest early:
- More Time for Investments to Grow
Once you start investing while you are young, you are giving more chances for your investments to grow into a significant amount. This is the beauty of compounding interest: it allows the investors to gain money over a period of time, which means more time equals more income as well. According to Warren Buffet, one of the most successful investors of all time, his wealth came from living in America, some lucky genes, and compound interest.
Let’s say you invest 5,000 USD in the first year with a 5% interest rate, compounded once annually. In 20 years, it will grow to 13, 266.49 USD. You’d have a total earning of 8,266 USD without you having to shed a single drop of sweat and effort. This is very advantageous to young adults, some of whom may lack the motivation to clock in hours of work to earn money.
Moreover, there are some great ways young people can invest through the help of legitimate online financial literacy websites.
- More Stable Financial Future
Investing is not a way for you to earn instant cash, but it is a way to earn income over time. So if you’re looking for a quick way to make some extra cash, then investing is not the way. Investing is more of an opportunity for your finances to grow so that when the time comes, you’d have little difficulty paying for student debt, and monthly bills and mortgages.
The future is also full of uncertainties, and you never know when certain situations can happen where there is a need for you to spend some cash. Investing while you are still young helps you in these types of situations because you do not need to loan or borrow money when the situation calls for it. With such, you can lead a debt-free life that gives you more stability in your finances. Plus due to inflation, your 200 USD could be worth much more in the next 20 years.
Moreover, you can even make money with the sharing economy with little effort.
- More Years to Learn and Experience
When it comes to investing, it is recommended that you start as early as possible. As you would have more time to learn the ups and downs of investing, you’d also have more years to overcome downfalls and learn from it.
Most young people nowadays are very good with technology; thus, they have access to countless information on investing through the internet. However, learning the trade cannot be done overnight and just by scanning random info on random websites. It takes years of experience to be an “expert” on investments. That is why it is good to start young. By the time you reach your early 30s, you would already know your way around the world of investments due to many years of learning and experience.
As they say, “Experience is the best teacher.” Information about investing is worthless if not applied. When you’re an experienced trader or investor, you would know whether the forecasts on the trading industry are right or wrong.
- It Helps You Set Priorities in Life
Whenever you’re investing, you are already looking ahead to your future. You may already have aspirations to buy your dream house or to buy your first sports car, which makes you more disciplined in budgeting your money, thereby avoiding short-term benefits and prioritizing benefits you can get for the long term.
Investing will make you think of how much you can get from the investment; thus, you would be able to set your goals and priorities, reminding you never to spend too much money on luxury items to achieve your financial objectives.
This is what most young people lack nowadays, and they tend to have a happy-go-lucky outlook on life instead of prioritizing the achievement of their life goals. Investing can help in this area because when money is at stake, they will feel the urgency to prioritize things that are needed instead of things that are wanted.
Conclusion
Investing is a great way to build your finances over time and it is always an advantage if you start young. By doing so, you are already creating a better path ahead of you, especially if you’re in Australia where the economy is one of the best in the world, wherein more investment opportunities await the young ones.
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