By : Shashank Suresh
The 20s are often a defining stage in one’s career. The decade of 20s marks major milestones in life, right from stepping out from home to a university, to the first job. Most of us didn’t have any source of income in our late teens-early 20s and relied upon our parents giving us pocket money. Fast forward, a few years later, we get our first salary and suddenly the feeling of being financially independent hits us.
One thing about money which most people often realize late is the value of time. People usually exchange time for money, which is perfectly reasonable for a young professional having lots of time. However, the goal of life should not always rely on us exchanging time for money. With the right investments, financial knowledge, money makes money. And that’s where Investments come along.
A very famous quote “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.” Learning how to invest and manage your assets is the best gift a young adult can give to themselves, something which their future self would thank them for.
Investment in the simplest terms would be using financial assets and allocating them to financial schemes like property, shares, etc.
Why are the 20s the best time to Invest?
Compound Interest, most of us have read about it in School but unless we pursued financial education professionally, we didn’t look upon Compound Interest after school. In basic terms, Compound Interest gives you interest on interest. It adds the interest accumulated on principal and the subsequent interests include the added interest previously.
Most people don’t realize just how crazy Compound Interest can be. E.g., If you manage to save 5000 every month and invest it in a Mutual Fund SIP (Systematic Investment Plans), in a period of 30 years, assuming an average rate of return of 10%PA (subject to market conditions), the return after 30 years will be as much as 1,15,00,000 (that’s right, it’s over a crore!!). So, if you invest at 25, when you’re 55, you’ll have over a crore. That’s just from investing 5000. As you’ll grow professionally, you can manage to save more and diversify your funds more or invest with bigger amounts.
Just to show the power of compounding, if you started investing 10 years later, if you start at 35, the same amount of 5000 with the same rate of interest, you will have around 39lakhs in 20 years. That’s almost 75 lakhs less. This is the power of investing. Remember, it’s not about how much money you put into the market, it’s about how long you stay in the market.
Start young, invest early.
Some of the best options to invest for young people are: –
- Mutual Funds;
- Direct Stock Market Investing;
- Cryptocurrency etc.
The best part about being young is there are fewer responsibilities and you can take greater risks. One should always minimize their risks but if you’re young, you can afford to place some money in schemes with a little more risk to potentially gain higher rewards.