1. Lower investments
In many cases, it has been observed that starting to invest early can bring down your need of amount for investments. Since you have a longer tenure available with you, the investing journey can be commenced with a lower amount of money. The younger your age, the lower would be your premium in case you buy life insurance. Your lower amount of investment can help you gain maximum return along with the benefit of life insurance cover and accidental death cover with companies like Life Insurance Corporation of India. The insurance sector works on the mantra, “Lower the age, less is the premium. The higher the age more is premium.”
2. Develops saving habit and improves spending
Individuals in their early 20s, unfortunately, develop the bad habit of unnecessary spending. The companions are also not matured enough to guide each other. But if you choose an investment plan or option at an early age, you will be able to develop the habit of disciplined saving. It will also help you control unnecessary spending. For example, if you take a life insurance plan with LIC where you need to pay a yearly premium of Rs. 30,000, you will be forced to start saving some amount every month to accumulate the premium amount of Rs. 30000 payable every year for the period you choose for the policy maturity. Thus, you will find that your decision of early investing develops in you a sense of responsibility, disciplined saving, managing to spend, and building wealth for your bright future.
3. Benefit of Compounding
The benefit of compounding is the key factor that is motivating youngsters to commence investing in their early 20s. Compounding has the magic that can grow your investment manifold in the long run. Investment pays investors' returns in two diverse ways – simple interest and compound interest. Compounding helps you earn interest on your interest i.e., the interest earned on your principal also earns interest and thus the overall value of your investments increases at a fast pace
4. Ability to take higher risk
The simple rule that applies to investment is – “Higher the risk better is the gain, lower the risk less is the gain” In your 20s, you have a good time to plan your investments and have more risk-taking appetite. It gives you scope to invest in high-risk avenues like equities, and mutual funds which also offer higher returns. The higher returns can help beat the rising inflation. Early investing leaves you the time to try investing in different investment avenues with the different risk level. If you start investing late, you are forced to look for investment options with more safety. The investment avenues with minimal risk are generally known to offer lower returns.
5. More time to manage losses
During your early age, you have more scope to risk investments in varied investment avenues and time to recover losses if any arise because of the volatility in the market. For instance, if you commence investing at the age of 22 and happen to make heavy losses in equity, you still have sufficient time till retirement that gives you time to recover your losses.
6. Early retirement
If you wish to go for early retirement, it is better to go for investing at early age. It gives you enough time to choose investment options that are designed to meet the need for a retirement fund. You can build the required corpus by disciplined investing. You can choose to go for pension plans facilitated by different insurance companies. The plans are flexible. The tenure, premium, and retirement plan can be chosen considering your need for wealth for retirement and other financial obligations.
7. Meet emergencies
Emergencies can arise at anytime in your life. You may be required to beg for money in the condition of medical or other emergencies if not developed the habit of saving. You can decide the amount of money you wish to park in an investment plan considering your income and need for money in the short-term and long term.
Your saved fund can help you in times of actual need like emergencies that include – medical treatment, child education, and more. Your good saving habit will help you make the right use of your income.
Conclusion
The above-shared information may help you gain motivation and understand why one should commence investing at an early age. You do not need much to begin. There are options like SIP, insurance plans, and more options that you can consider for yourself. You can start as little as Rs. 500 or Rs. 1000 per month. The amount can be increased as there is growth in your income.
The more you invest the better you yield at maturity. You can increase Return on Investment (ROI) with reduced brokerage costs and competitive pricing of products. For the same, you can perform research online or seek expert advice on it. Financial institutions like banks and NBFCs facilitate fixed deposits that feature a fixed rate of interest, flexible tenure, return of principal, interest income irrespective of market conditions, and liquidity subject to a minimal penalty. You can also explore to know what is better than a fixed deposit prior to your investment decision.
So, if you have not yet commenced investing, go for it immediately. Get set to fulfill your different financial goals in your life with a good habit of disciplined saving.
