Finance

Paying dividends: Could investing from a young age work for you?

Paying dividends: Could investing from a young age work for you

We’re all young once. And, for those of us with the benefit of experience, we know it’s all too easy to put off making any big financial decisions. It could be, however, that life as a twenty-something is a prime time to start investing. Of course, it’s not something that’ll pay off right away. But putting your money to work from an early age can mean big rewards in later life.   There are lots of forex trading strategies which you can learn easily.

For a start, investing is something that you can start doing today. You won’t need a huge pot of cash and there are no qualifications required. All it takes is a willingness to learn the ropes, some patience and maybe an idea of where you want to be in later life. From there, you start to see why investing from an early age is one of the smartest financial decisions you’ll make.

The death of savings?

With any investment decision, there’ll be an element of risk involved. After all, you’re putting your faith in a specific stock, currency or market to move in the ‘right’ direction. And this risk can often be a reason why some people prefer to put their cash into savings. Yet, this way of thinking could now be a costly error as it becomes harder to safely grow the cash you save.

As interest rates tumble and high-yield savings accounts disappear, the main selling point of savings accounts is fading. And that’s one huge reason to consider investing instead.

You’re a tech native

The mere thought of investing can conjure up images of stuffy offices, complex jargon and a scrolling ticker of numbers. But investment in the 21st century is a whole new ball game. And being tech natives is one reason why younger adults are in a prime position to invest. All you need is a laptop or smartphone and internet access.

It’ll let you access online trading platforms and learning resources at home, on the go and in an instant. You can even test your investment skills and knowledge before you risk any actual cash too. If you’re looking at currency trading, for example, a forex demo account is a superb way to learn the ropes – trying out strategies that’ll eventually make your money go further.

Time is on your side

The sooner you start investing, the more time you have to build your returns. Part of this is a freedom to take more risk. With fewer responsibilities, there aren’t as many vital expenses to budget for. You’re unlikely to have kids and a mortgage, for example. So, you may discover a chance to be more aggressive and withstand greater market volatility than in later life.

Compound interest is another time benefit of investing as a young adult. This is when interest is charged on the initial investment amount – along with any previous interest accrued on that amount. What does that mean in real terms?

Well, here’s an example. If you invest £2,000 as a 20-year-old into a fund that offers a return of 10% each year, it’ll be worth nearly £15,000 by the time you’re 40 (as long as you reinvest the earnings each time). The longer you allow compound interest to do its thing, the more it’s able to make for you. And only by starting early can you give yourself that flexibility.

Planning for later life

There is a trade-off involved when you decide to invest from an early age. It’ll be a long game. And you won’t necessarily see the benefits straight away – unless you’re really aggressive and are willing (and able) to take the risk. But what you are doing is building a nice pot of cash for you to enjoy your later life. And that’s really going to pay dividends down the line.

As a population, we’re living longer than ever before. The cost of living also keeps going up. It means you’ll need even more money once you retire – even though that seems like a long way off. While £1 million sounds like a lot, it’s unlikely to go far in later life. So, you may not realise it just yet, but investing in your twenties could prove the best decision you’ll ever take.

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