How To Begin Investing At An Early Age

By Charles Hopkins Published 09/19/2006 | Entrepreneur

If you want to have a nice large nest egg when you are ready to retire, you cant begin to save once you have reached your fifties. The investment years left to you at this point just arent enough to save what you need to retire on. The younger you start to invest your money in ways to make it grow, the better it is for your future. You need many years to allow those investments to pay off. You need the initial amount to grow and the compound interest, if thats how you choose to make your money grow, to keep mounting up.

An example of two investors who started at different times of their lives can tell you a lot about the simplest method of investing, which is putting your money into a high interest savings account. Picture one person who begins to invest their money at age twenty-one, putting away five thousands dollars a year. The other person does not start investing until they are forty, but they put away twenty thousand dollars yearly. That is four times as much. By the time the younger person gets to retirement age they have invested two hundred and twenty thousand dollars. The person who started later will have saved four hundred thousand dollars despite the shorter time period. But with compound interest the person who began earlier will have three million two hundred and sixty thousand dollars waiting to retire with. The person who started later will have accumulated just under two million. This shows how an early beginning in saving and investing your money can make a huge difference to your future comfort. The person who started earlier has an amazing sixty percent more money saved.

Another good way to invest is to get involved with any reasonable plan that your employer offers to their employees. This lets you start investing young. These programs, which you can become a part of when you start your first job, will sometimes even offer to match up to fifty percent of what you put in. Thats like getting free money. Not all employers do that, but some use it as a means to encourage employees to commit to their company. If you should leave a company where you have contributed to their employee savings plan you have two alternatives. One is to dissolve the retirement plan, pay the taxes that will be due on it and then decide what you want to do with this money you had invested over the years. Another possibility is to simply shift it to the next place you work, putting it into their plan, without paying any taxes on it and watching your investment as it continues to grow.

The fact is that when you start to invest your money, no matter the type of plan you use, the younger you can start the more your money will work for you, grow for you and be there when you are ready to slow down and enjoy your life. A good easily investment can even mean an early retirement.