Why You Should Invest in Your Early 20s

Almost everyone has, at some point in their lives, dreamed of becoming a millionaire. In order to build big, you have to think small, so, while not everyone can become a millionaire, everyone can make life choices and actions that will inevitably get them richer in the following years. Of course, this requires persistence and can be hard sometimes, but we guarantee that if you are careful with your investments and start making smart choices early on - you will be better off.

In this article, we are going to explain to you the benefits of starting investing early on.

Paying off your student loans

One of the first real financial struggles that you run into in your early 20s is after you have finished college and are left with student loans. The biggest problem with student loans is the fact that they basically inhibit you from pursuing savings since all that you could save in the meantime go into paying off your debt.

Now, how can investment help you with this? Well, if you start investing just as you start college, you will be able to pay off your student loans a lot faster since you will gain a head start by saving investment money for the time when you finally enter the workforce.

Paying off mortgages

Not only is searching for a perfect home hard enough, dealing with the loans and the mortgage is even more daunting. While not many people are able to buy their own home in their 20s, when the time does come to buy it, the best thing that you could do is to be able to pay off the mortgage as soon as you can, so that you can live more peacefully and continue to save on the side for something else. If you don’t know a lot on the subject of mortgage insurance, Jake Taylor teaches how to pay off your mortgage sooner, and this mortgage expert even goes to explain that by paying down your mortgage will, in time, unlock you a lot more favorable interest rates which will hence transform the refinancing to a lower rate. This will accelerate your payoff even further!

Living below your means

There is not a period in an average lifetime where it is more socially acceptable to barely meet your ends. So, by that, we mean ramen for breakfast, lunch, and dinner, living with 6 roommates, driving an old, barely working car, and so on. Of course, we are amplifying the message, but you do get the point. As you get older, it becomes a lot less socially acceptable to do all that.

Now, how does that tie in with investment? Well, let’s start with the fact that most of the millionaires in the United States live below their means. Now, if you invest in your early 20s, and spend all the money that you have earned, you will lose everything that you can, later on, build on. But, if you choose to live below your means in your 20s no one will bat an eye, and in the long term, when you’re in your 30s and 40s and are able to reap the benefits, you’ll have your younger self to thank for saving up back then.

Taking more risks

Younger people are able to do what barely anyone older can - take more risks. With the whole wide world full of options, it won’t hurt you a lot if you make a wrong investment sometimes, and you still have a lot of time to build on what you have learned. Not to mention the fact that the more time you are investing in the market - your money has that much more opportunity to grow.

Learning on the go

This one continues right on the “taking more risks” section. Since you are able to take more risks when you're younger, and you will definitely make mistakes as you go (it’s a given, we all do, no matter when do we start investing), by your 30s you will have gained something invaluable - a lot of useful experience. The reason why this is so important is that if you do start investing when you’re older, these mistakes could potentially cost you way more than you can handle, but when you start off young, you have time for trial and error in order to be able to avoid the mistakes that you would make if you didn’t have the experience.

Compound interest

If you haven’t heard about compound interest yet, now it’s time to do so. This is such an important term, that even Albert Einstein has called it the most powerful force in the universe. Compound interest pretty much refers to money that can, after a certain amount of time, grow upon itself. Basically, it is the name for the fact that investment income grows upon its growth. It maybe sounds a bit abstract, but we assure you, with just a little research, you will understand that compound interest is what makes your $100 monthly investment grow exponentially in the long term. The most important variable of compound interest is the time. More time passed equals more money gained from the investment - and that’s why you should start as early as your 20s.

Financial freedom in the future

The reason most people tend to always seek more money is that they seem to seek happiness. While there is always an ongoing argument on can money really buy you happiness, the fact is that, if nothing, financial freedom gives you, well, exactly that. Freedom. And it is a lot easier to live knowing that you are comfortable and will not experience bankruptcy just because you have had to undergo a certain medical procedure or because you have been in an accident.