Why You Should Start Investing In Your 20s – Loans Buddy

Our Top 5 Reasons Why You Should Start Investing In Your 20s!

For many young adults and individuals in their 20s, investing is probably one of the last things on their minds. Most young adults at this period in their lives are either paying off student loans or have only recently entered the workforce, making investing some of their hard-earned income less of a priority.

This can often be attributed to lower salaries and higher loan repayments. But, it should also be noted that young people also have a considerable advantage when it comes to investing as starting young provides you with many opportunities that you may not have if you start investing later in life. Take a look here at our top 5 reasons why you should start investing in your 20s.

Why Investing Your Money is Important

Investing your money when you are young is a great way to start developing good financial habits that will help to contribute to your future. Investing is an effective way to put your money to work and potentially build wealth. Smart investing may allow your money to outpace inflation and increase in value.

The greater growth potential of investing is primarily due to the power of compound interest and the risk-return tradeoff. But these aren’t the only reasons that you would want to start investing when you are in your 20s. Take a look at our top reasons why investing your money is so important.

1. Compound Interest

The benefits of compound interest are perhaps one of the most significant reasons why you should start investing when you are in your 20s. Compound interest is interest that is earned on the money that you invest in your account and any interest accrued. As your investment account grows, your compound interest will continue to grow as well. With compound interest, you’re not just earning interest on your principal balance.

Even your interest earns interest. Compound interest occurs when you add the earned interest back into your principal balance, which then earns you even more interest, compounding your returns. This has the potential to make you a lot of money for a relatively small investment amount if you start in your 20s.

2. Learn Your Lessons and Make Mistakes Early

No one is an expert when they first start investing. It’s inevitable that you are going to make some mistakes in your investment journey. Everyone has to start somewhere and make these mistakes as they learn what works for them. It’s better to make your mistakes and learn valuable lessons when you are younger as this will give you plenty of time to bounce back from the financial hits and still end up with a sizable investment account later on. Costly mistakes when you’re older can be much harder to recover from.

3. Risk Can be Your Friend

Investing when you are younger allows you to take on a significantly increased rate of risk. Investing early means that you have the time to explore riskier options without completely hurting your chances of retiring when you want to. Whether this means dabbling in cryptocurrency or other high-risk investments, you have the ability to take on more risks due to the fact that you won’t need your money for many years.

It has also been established that an investor’s age can impact the amount of risk they are willing to take. Younger investors are both more willing to take large risks and are more capable of withstanding risky decisions in their investment activities. Individuals who are reaching retirement age will gravitate towards more low-risk and low-reward investment opportunities.

4. Can Utilise Your Tech-Savvy Skills

Having grown up with plenty of advanced technology, the younger generations are in the perfect position to be able to utilise their tech skills for research. The ability to research, study and apply online investing tools can provide countless opportunities to contribute to an investor’s knowledge, confidence and ability to get ahead in the investment markets. Online trading platforms also provide countless opportunities for both fundamental and technical analysis, as do chat rooms and financial and educational websites.

5. Time is on your side – so why delay?

Many investment options such as stock have historically generated strong returns, especially over longer periods of time. The earlier you start, the higher your chances are of getting on the path to success in the future. Investing should be a long-term strategy. The sooner you begin investing your hard-earned cash towards the future, the longer you have to make your money work for you.

Take a Look at Our Blog for More Handy Financial Tips

When you’re just starting out in the workforce or you’re in your early 20s, investing your money towards the future can often feel like something that you’ll get around to doing later.

You often have other things to prioritize or not a lot of disposable income as you are still getting your career off the ground. But, this is exactly the perfect time to start investing. Starting small and getting your investment portfolio started can go a long way toward contributing to your future.

It’s also the perfect time to experiment with your investment strategies and learn what works and what doesn’t. Rather than waiting until later in life, take advantage of the opportunities you have available in your 20s and start investing early.

If you need to get in touch with our team for any reason you can chat with us here (https://www.loansbuddy.com.au/contact-us.html). Otherwise, submit an application with us today and see how we can help you out.