02/02/2016
Waking up early in the morning, planning for your family member's birthday party, enrolling your kid to a preschool all starts early. In terms of personal finance, 'the earlier, the better' catchphrase is so popular to investors for 1 reason: it is true.
Let us see the benefits of early investing:
1. When you start investing early, you can take the risks - It is common that when it comes to investing, the more volatile the market is, the more you would yield from it.
Investors, who have the time to recover (because they start early) if something were to go wrong, have the opportunity to make riskier moves.
So if you plan to invest 'late' in life, you can expect that your action in investing is more cautious.
2. Compound Interest - This factor really makes a difference. So if you want to be an investor, you should understand the benefits of investing early and taking advantage of the potential gains from compound interest.
Ex. Pia and Amy
Pia started saving at 25 stopped at 35, while Amy started at 40 stopped at 50.
Pia saved P2k a month
2 x 12 = 24k (per year)
24 x 10 = 240k (for 10 years)
Amy saved 4k a month
4 x 12 = 48k
48 x 10 = 480k
Pia would have gained P240k while Amy P480k on the 10th year.
Now let's add compound interest (10% for both) into equation. By the age of 60, if they withdraw their respective investment, it would have cost:
Pia = P6,067,604
Amy = P2,182,624
Now who has more.
(this is just a recreation of https://www.youtube.com/watch?v=3_9Y5uO8tKA, please watch to better understand. Credits to Pesos and Sense smile emoticon )
3. You improve yourself - This includes your spending habit, your finances will have a better situation down the line and your quality of life will be upgraded.
When you start saving and investing early, you develop some sort of discipline, enabling you to afford things that others canāt when your retirement comes.
By taking advantage of your youth, you can get a head start on saving for your future.
If you want to learn more, contact us at:
+63915 187 1405
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[credits to Advisor for Life]