UK-based financial expert Chris Linkas warns that “numerous college students and young professionals procrastinate too long when it comes to investing money in the stock market”. And there are solid reasons that point out that they are missing out on significant benefits from investing young (Kirkland).
For starters, young adults have the benefit of time availability on their side, allowing them to take risks and potentially gain from higher yields in the early stages of investment. Time can enable the young investor to recover from a potential loss that would be catastrophic at a later stage, and continuously learn from their experience. This principle holds true even for the most experienced investors: With over 25 years in the financial world, Chris Linkas says that he is never finished learning (http://premiergazette.com/2018/04/chris-linkas-secret/).
A head start in investing can easily translate to a stronger financial situation against counterparts, increasing the acquisition power in the long run over those who started saving for retirement later on. This ties into an improved quality of life, as having financial security towards retirement can help avoid taking unnecessary risks or making reckless choices to ensure a stable retirement. Chris Linkas points out that “Younger people tend to have tighter budgets, and they often say that they will think about investing when they get older”, exposing them to higher risks on the long term.
Young adults that start investing also build disciplined spending habits, where planning for the future and cutting costs when needed is seen as an opportunity to earn money through savings, in opposition to impulse buying.
The last principle that sustains the benefits of investing young is frequently shared by Chris Linkas, currently European Head of Credit for a UK Based investment group: Leveraging on the power of compounding. Based on a modest 5% interest rate, $10,000 can become $70,000 over a period of 40 years. This is the result of two adding forces: the growth on the initial investment, plus the additional growth of the previous period dividends.