For people who invest at a young age, time is on their side. Young adults have more time for their investments to compound than an older adult, so they have a chance to make more money. In a hypothetical scenario, if a person at the age of 40 invests $5,000 to start with a 3% annual interest rate and plans to cash out by the retirement age of 65, that $5,000 will have turned into $10,468. If a young person, say the age of 21, invests that same $5,000 with the same interest rate then by the age of 65 it will have turned into $18,357, almost twice as much as the 40 year old. The young person didn’t strategically do anything different, the young person just had more time for their investment to compound.
Younger people also have more time to tackle the investment learning curve. Good investment strategy is not something that people can learn over night. Older people have responsibilities to worry about (see the next tip) and have less time to experiment on the market.
One person who learned about investing at a young age is a man named Chris Linkas (Linkedin). His experience led him to being the head of a commercial real estate funds group in New York. He then went on to becoming the European Head of Credit, over a 20-person European credit group.
Another good reason to invest at a young age is that younger people can take more risks on high yielding investments than older people. Young people have more time and energy to bounce back from a risky investment that may have gone wrong. They also don’t have as many responsibilities to be concerned about. Older people have retirement looming over them, as well as families, mortgages, and other responsibilities to be concerned about so in most cases they aren’t in a good position to risk losing money. In short, investing at a young age can lead to a better financial future.