It’s not something most college students think about, but investing money early can benefit you in the long run by a substantial amount. The sooner you start investing the more time your money has to grow. This is the compound effect.
You may be thinking, “I don’t have enough money to start investing.” Many students believe they need to have a couple hundred to a thousand dollars to start, but that is not necessarily true. Saving as little as $20 a week to invest at the end of the month means you have $80 to put in a investment tool like a stock, ETF or mutual fund.
Here is an example of why compounding is so important. Let’s say your friend at the age of 25 starts investing $3,000 a year in an account for 10 years in an investment tool, that gives you a 7% annual return. At the age of 65 your friend will have around $338,000.
Now let’s say you decide to start at the age of 35 investing $3,000 a year for 30 years in an investment tool that gives you a 7% annual return. At the age of 65 you have about $303,000 dollars. Your friend invested $30,000 while you invested $90,000 dollars—a $60,000 difference because you decided to wait 10 years to invest.
Your friend comes out on top with $35,000 dollars more than you at the age of 65. This here just goes to show that investing early is far more beneficial than waiting to invest. Even if you can do as little as $20 a week and have $80 at the end of the month each month to invest you will still be putting in $960 dollars a year in your early 20’s. Start young, retire comfortable and be RICH!