Never Too Soon To Start - Harnessing The Power Of Compound Interest As A Young Adult
As a young adult, there are so many things you want to spend your money on. You may be looking at your first home, your first car, or saving up to go traveling. Or perhaps you are just living day to day and spending a lot of money on food and nights out.
If you have short-term or long-term goals, the hard fact is that you are going to need money. There is only one person you can definitely rely on to turn your dreams into reality - and that is you. You may not have really thought about savings and investments before. Starting to set aside just 10% of your income every month could set you up on your path towards financial abundance and security.
When you are young, you have the benefit of time. This means more time for your savings and investments to grow. Nobody at retirement age regretted saving. They either wished that they saved more, or they felt grateful that they planned ahead.
In the time between being a young adult and retiring, lies a whole world of choices. If you start saving when you are young, you will have a lot more options in the future. You can think about your money in three distinct ways.
Your short-term money is what you need to cover your expenses for this month and the next. It goes towards food, rent, utilities, and entertainment. Your medium-term money could be saving up for a car or traveling. Your long-term money is for your retirement. It can be challenging to see this far ahead as a young adult. One of the best ways to ensure that you will enjoy a good quality of life when you come to retirement is to start saving early.
Young people today have so many ways of harnessing the leverage of their savings and investments. A tool like MPI allows you to produce up to 4x more income than traditional retirement vehicles. MPI uses the power of compound savings and compound acceleration to make your money work for you.
The most significant benefit of starting to save early is the compound interest that you will accrue. If you put your money to work for you and you leave it untouched, the interest you earn will become part of your savings and will start to earn interest as well.
When it comes to compound interest, the simple fact is that when you start saving can actually outweigh how much you save. An early investment that is left untouched for a long period of time can add up to a large sum, even if you don’t add to it.
If you invest money every year from the age of 18 to the age of 28 and then never invest another cent, the power of compound interest could give you a huge retirement savings fund. If you invested the same amount of money from the age of 45 to 55, you would not receive this benefit.
Obviously, if we start investing and saving early and continue to invest throughout our lives, then the power of compound interest is going to be multiplied. The biggest key is starting at an early age.
It is clear that as a young adult, you have many expenditures. Between student loans, daily expenses, a mortgage, etc., it may seem nearly impossible to set money aside for such a long-term goal. But we can clearly see that the power of compounding will make it extremely worthwhile to save as early as possible.
We live in a world that seems to be increasingly short term in its view. Compound interest shows us the value of looking in the long term. This principle is key to successful investment strategies. Starting to save later in life could lead you to a shock. You may retire and be impoverished.
As well as investing early, you also need to come up with a sound financial plan. You may want to look at teen banking options available. Banking choices for young adults could offer rewards and benefits. They could be fee free or offer higher rates of interest.
Think about the bigger picture of your financial life. Do you want to pay off student loans as quickly as possible? Do you have credit card debt? Are you overspending? Consider writing out a budget with all of your incomings and outgoings. This will allow you to see where you can cut back. If you want to set aside 10% of your earnings for long-term savings and investments, this will require some careful planning.
Some employers may offer “contribution matching”. This means that if you put a percentage of your salary towards a retirement fund, the company will match your investment up to a certain limit. This means that if you put 5% of your wages into a retirement fund voluntarily, your employer will match your contribution, effectively doubling the amount of money going in.
A great way to secure your financial future is to automate your investments. This means that you set up payments to be taken from your bank account as soon as you get paid. This way, you will learn to live on less and won’t have to think about your contributions to your savings. You can harness the power of compound interest while barely thinking about it.
There are all kinds of apps that will help you to save. They may help you to track your spending, or they may round your purchases up to the nearest dollar and put the difference in your savings account.
Compound interest earned from investing can help you to grow your money faster than anything else. It isn’t a scam or pyramid scheme. It is simple mathematics. The sooner that you start saving for your retirement, the more time you have to take advantage of the power of compound interest.
By starting your savings and investments plan right now, you can massively increase the return on your investments and have a nice healthy pot of money by the time you retire.