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Invest While You Are Young
Invest While You're Young -- Why it's Important
You're fresh out of school, got your first full time job, and your enjoying the money you are making.
It's hard to think about the future when you're expecting pay increases and job promotions. After all, you'll soon be making even more money. So, isn't now the time to spend your money on all the good things in life?
But, financial strains on our society make saving for your own future more important than ever. A number of large companies are looking for ways to reduce expenses -- and retirees are a prime target. Our Social Security system is looking toward ever increasing gaps between the money coming in and the promised benefits. The future for benefits from external sources is not looking good.
When you're young, investing for your future is certainly not on your mind. Yet, now is the very best time to invest. Your money will work hard for you over your working lifetime. The "magic" of compound interest will work wonders for your net worth over the next 30 or 40 years.
If you could invest just $2000 in your first year of work in a mutual fund providing an average return of 8%, at the end of 40 years you would have over $40,000. That may not sound like a lot, but that's only for your first year's investment.
If you continued to invest $2,000 a year, every year you worked, after 40 years of work you would have more than half a million dollars.
If you have a 401(k) program at work, you can probably invest much more than $2,000. If you could invest $5,000 a year, after 40 years of working you would have nearly one and a quarter million dollars. Just from your 401(k) program alone, you would become a millionaire after 37 years of work.
And, the best news is that after 40 years of work, your 401(k) investment is growing at over $90,000 a year. This means you can retire, take over $90,0000 a year from your investment, and never reduce the principal.
If that isn't worth investing for, I don't know what is.
And, there is even better news. Often, you company will invest additional money in your 401(k) account. These "matching funds" will actually make your account grow even faster and larger.
The size of your account is going to be determined by the rate of return you can achieve, how much you are able to add to the account, and how soon you can start adding to your account. While the rates of return may vary, over the last few decades many funds have been able to keep their rates of return fairly high.
A 401(k) plan normally has a number of mutual funds you can choose from. You should diversify your money into at least five or more of the top producing funds. By choosing a smaller number of high producing funds, you run the risk of losing a greater percentage of your assets if one of the funds should experience losses for the year.
So, why invest while you're young?
- It takes years for compounding growth to become effective.
- You'll develop a habit of investing.
- You're future after your retirement will be much happier.
- You won't have to depend on the promises of government or your company
To a large part, you will determine your future. Invest for your future as early as possible.
Here are some more articles for you to consider:
Picking Top Mutual Funds
Retirement Savings Calculator
Additional Resources
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