Why investing at a young age is helpful and how is it important?

Are you in your teens or in your 20s and have not started investing yet? Or are you just new to all these terms and everything’s confusing? Well, then I would say you are at the right spot to know about all these doubts.

Let us begin. Before most people earn, they save. How, you ask? As a kid, his kiddy-bank takes a first step. Although, it’s the kid’s choice to either save the money he receives or spend it on something he wants. But, little does he have any knowledge or need towards Investing? No. Because he is not in that stage of life where he could plan his career or earnings in the long run.

But, as you grow up, you will definitely want to know the significance of Investing. Here’s an understanding and a short guide to why it plays a major role from an early age.

  1. Long term plan.

 The earlier you begin, the more you earn! Yes. The talk here is about Wealth. And “earn” in the sense of “collect”. The best part might not be about depositing but it’s about the interest. 

Interest is a key that encourages the public to invest in the bank. And it’s the compound interest in actuality. Let us take an example for a better understanding.

Suppose you deposit 1000 Rupees per month with an annual interest of 5%. So, in the first year, for Rs. 12,000 deposited, with Rs. 613 interest amount, Rs. 12,613 is your balance.

And for the second year, the balance jumps to Rs. 13,259, even if you didn’t deposit any amount the whole year.

And so on, from Rs. 12,613 being your initial balance, with 5% annual interest rate, in a decade, your balance reaches to Rs. 1,97,641, of course with a regular deposition. But hey, Voila!

  1. Savings.

There might be a question that arises how savings and investing differ. 

Savings is the money that is reserved for your needs such as in an emergency or put it to use when urgently required.

On the other hand, Investing is to buy funds, stocks, bonds or shares so that you can expect a profit income in return for your long term goals.

However, being a student, it might be a bit difficult to save money all the way through before you earn. But even by saving as little as you can, can surely help at times when needed.  

  1. Mutual Funds.

As an example of a kid mentioned before, let us assume that he wanted a chocolate that was a pack of 5 chocolates combined together. And that being sold for 5 Rupees. Let’s say he had 2 rupees with him and wanted only 1 chocolate from that particular pack.

So, he called his friend and made an understanding between them. With the help of the kid’s friend lending 3 rupees, they bought themselves the pack of 5 chocolates with 3 for his friend and 2 for himself.

Now commonly, in the business and market terms, Mutual funds can be defined as a large number of investors that sum up their investments on one common objective. And the income that is generated is proportionally distributed among investors.

Sound fair, right? 

And so, the advantage is that the scope for a profit is higher while investing with a group rather than all alone.

  1. Why from an early age?

Starting anything from an early stage, is undoubtedly a very good thing. Although it takes a lot of time, begin your funding from little. There’s no compulsion to be very serious about it. 

Learning and keeping yourself trained to this financial atmosphere, can help you deal with huge business’ management, economic organisations, financial analysis and more in the future.

There might be many doubts, questions arising about how handling money alone would be risky and difficult to maintain at all times. But with proper guidelines and experience, it can be helpful to resolve and be more careful while taking up huge responsibilities in your career ahead. 

Let us take a simple look at one of the most influential investors, Warren Buffett.

Warren Bufferett is a millionaire who started his first investment at the age of 11. He is now the CEO of Berkshire Hathaway and one of the most successful investors and the seventh wealthiest person in the world.

Afterall, his passion and determined interest in his young age has made him who he is today. He is an example and a true inspiration to many investors all around the world. 

Here is all about How did Warren Buffett get started in business .

Also read :

Hoping you get an idea of how productive and important it is to start investing from a young age, so that facing any challenges could be handled easily.

Thank you!

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