It is false belief that investment is meant for the elderly/ income earners approaching retirement. On the contrary, it is never too early to start investing. And because of the way investment works, the earlier you begin, the more money you’re able to compound over time. Here is how to start investing from an early age!
1. Save to Invest
Setting aside some money in the bank is a great financial habit to develop at a young age but don’t just save for the sake of saving. Over a period of time, the value of money depreciates. This also means the value of your stored up money depreciates as well. So save instead to invest your savings which brings higher yields.
2. Open an Investment Account
When people hear investment, their minds travel to stocks and shares. But investment also includes low risk investment vehicles like Fixed Deposits that are targeted at providing investors with a higher interest rates than the regular savings account. Being wise in your investments takes practice and a good place to start is by opening an investment account.
3. Get on the Money Market Train
Apart from the Fixed Deposit account, there are also other investment vehicles like money market instruments. They are a source of short-term financing for corporations and the government with maturities of one year or less. They are usually easy to liquidate and provide a relatively high degree of safety. These include Treasury Bills, Banker’s Acceptance, Certificate of Deposit etc.
4. Develop Good Financial Habits
It can take some years to develop firm financial habits. This is why one of the reasons investing at an early age is a great move because it allows you review and alter your money habits early. Do you want to build the habit of saving? Say no to impulse buying? Or even take time to budget? Start to work on developing these financial habits because they will influence the decisions you make in the future.
5. Take Risks
Financial obligations increase as you grow older. And at the same time, your risk tolerance reduces. At an early age, you should take as much risk as you can. If you win, congratulations! And if you lose, the gravity will not be as great when compared with if you had financial responsibilities such as taking care of your family.
As a plus, taking risks helps you learn more about the investment world and by the time you’re grown, you will have more experience than people that started at a later age!