Investing when you are young and have just started earning might seem like a complicated process. However, “the earlier, the better” is a phrase that you have probably heard throughout your life; and it is true when it comes to making smart investments. Many believe that age is an indicator of when to start investing, but this not true. Age is never a barrier to investment, and the right time to invest is when you are confident regarding how the process works, whether it be investing through peer-to-peer or P2P Lending, stocks, mutual funds, etc. Whether you have just graduated from college and have started working or have been working for a short period and want to move towards achieving your financial goals. Either way, investing early is a great step towards a bright future.
Benefits of Investing Early
Investing early in life can have a wide range of long-term benefits that may not be widely known. Therefore, we have listed some of the most significant benefits below:
1. Investing in small amounts can be powerful
When you have just started your professional career, it might seem hard to invest, but even small investments can be extremely beneficial in the future. For example, if you invest a base amount of Rs 1000 deposit Rs 500 per month and let’s assume, get a 12% annual average return on the investment. Then in 40 years, this small investment could be worth Rs 50 lakhs.
Now if you start investing in your 30s, the amount you invest will have to be greater to get the same long-term returns.
2. Better ability to take risks
Volatile ventures often yield the highest returns on investment. And you can take advantage of this early in life by investing in risky ventures. Not only will this be a great learning lesson, but the advantage of time allows you to make up your losses in case of poor decisions. Young adults can be more aggressive with their investments, and thus, have the chance to reap bigger returns.
Adults in their 30’s or beyond tend to be more cautious in their investments as they have fewer earning years ahead of them. So they move away from risky ventures, such as equities, and into safer options like bank deposits. Some investments like Peer to Peer Lending are considered safe regardless of age as returns are guaranteed.
3. Compound interest is a big boost
The power of compounding is a great benefit of early investments. Compound interest or interest on interest is when you reinvest on interest rather than paying it off. This way, you get more returns in the next period.
For example, let’s say that you invest Rs 10,000 as the initial fixed deposit amount and deposit Rs 1000 per month for 5 years. Then, if the interest is compounded annually, the total value of this deposit is around Rs. 82,385. Thus, compound interest added more than Rs 12,000 in this scenario.
4. Improves your spending habits
Investing early teaches you discipline and greatly improves your spending habits. Rather than splurging or making impulse buying decisions, you will learn to focus on sticking to a budget and spending where needed. By investing more rather than spending unnecessarily, you earn more in the long-term.
When you have the urge to buy a new phone, regardless of its need, just calculating how much that amount will grow if you invest it can deter you from making the unnecessary purchase. This way, you save more money and spend it in the right avenues. Thus, P2P Investment is the key to saving more and having a better future.
5. Gain financial independence and security
Life is unpredictable, and it is on you to be ready for it. Many adults struggle with financial insecurity, even though their 40’s and 50’s. By investing early and achieving financial goals quickly, there is security in times of hardships and emergencies.
P2P Lending is a great way to assure that you meet financial requirements when urgently needed. There will no longer be a need to borrow money from others.
Rather than worrying about bills and loan repayments, you can focus on living your dream life, all with the help of early, smart investments.
6. Keep inflation at bay
Every year, inflation chips away at the value of your money. Everyone may not be able to earn enough to outpace inflation and maintain their money’s value but each individual has the ability to invest. Smart investments can help you keep inflation from strongly affecting your finances.
7. Support your retirement plans
No one wants to keep working forever; this is a fact! Most people work so as to gain future financial independence, but with smart investment ventures, such as P2P Lending, you can gain this freedom much earlier than your peers. Putting efforts towards disciplined investing can allow you an early retirement option, so you live your dream life, rather than constantly worry about your finances
Investing early in your career may require some sacrifices, such as lesser outings, but in the long term, there are a host of benefits that will make up for this. In simple terms, the earlier you start and the smarter your investments are, the more wealth you acquire.
If a lack of knowledge is something that is holding you back from investing, then there are wide arrays of online resources that are at your disposal. Platforms like i2iFunding even have classes to help regarding the same. So if you are just starting out and need quick returns, then P2P lending is a smart investment.