How Young is too Young to Invest

For many reasons, there is no such thing as being too young to invest. In general, you want to have as much time investing as you possibly can, and so the younger you can get started the better. The primary reason for this is that it allows maximum time for compound interest to take effect.

“The most powerful force in the universe is compound interest.” – Albert Einstein

Basically, the sooner you start, the longer the money that you do invest will have to grow, and the longer the money has to grow, the more compound interest kicks in, and the more money that you will eventually have. If you are really going to make money through investing, then compound interest will have to be a big factor in that.

To make the impact more clear, it is easiest to look at some numbers. Let’s say that you save $1000 and invest it right away. Let’s say that (to make things simple), that $1000 earns 10% every single year… here is how much you would have after a certain amount of year:

Start – $1000
Year 5 – $1464
Year 10 – $2357
Year 20 – $6115
Year 30 – $15,863
Year 40 – $41,144

So you can see the great power of compound interest. In the first 20 years of that investment, you would earn about $5000, which is nice, but you can do better. However, during the next 20 years the money gains about $35,000. This is just for a one-time $1000 investment, but hopefully you’re saving more than that for retirement, which makes the growth even more pronounced. Compound interest only begins to kick in the longer the money is being invested, which is why it’s important to get started as early as you can.

All of this is why there’s no such thing as being too young to invest. The younger, the better, because then your money has more time to grow! Chances are, if you are worried about being too young to invest, you are on the right track. Most people wait too long to start investing, and they have to try to catch up. If you start early, you will be able to invest money at a reasonable pace, and you are much more likely to wind up with your savings at a level that you are comfortable with. So get started as soon as you can!