Starting early has immense benefits, especially when it comes to letting your money earn on its own. The best phase to start investing and learning to earn is from the moment one becomes a major. The 18th birthday should mark the beginning of financial independence. There is no bigger motivator than to witness your money multiply with your right choices.
Why should I handle money on my own?
The real worth of money
The most common statement one will get from elders/parents is “you start earning, then you will realise the value of money”. While this is right, a young college-goer can learn this practically well before starting to earn. Invest from the pocket money and you will realise the importance of the statement. To know the real worth of money it is critical you start investing right after becoming a major.
Practical knowledge is the best way of gaining experience, more so when it comes to letting your money earn. At a young age, with access to meaningful information, you will tend to learn the details of investing and deciding on what is right and when. Researching on the various modes of investment will surely improve knowledge and make you wiser at an early age.
Ability to evaluate
It is like taking an exam with Multiple Choice Questions (MCQ), where there are options provided and you need to select the correct option. When it comes to investing, with the knowledge that you gained will give you options to invest, if you have limited resources you will have to carefully select one or a few options out of everything that you learned. It gives you the ability to evaluate and make choices. You will fail at times, but failing teaches more than success, so go right ahead and choose what you think is right then.
Higher time horizon
Investments usually pay more with time, at a young age if you invest early, with time your investments will grow more, and you will save more. Imagine this, if you have to own a house at a young age, while the loan eligibility would be less,
your EMI as a % of the monthly salary you will progressively earn over a period of your loan repayment will ALWAYS reduce. Thus, you are likely to save more given the tax advantage on home loans.
Investing early lets you have access to cheaper deals thanks to the younger age. Typically, with regards to life insurance and health insurance plans, starting early is the best way. Imagine, a term insurance cover of INR 1 Crore for 50 years, for a young 25-year-old healthy male would cost roughly INR 10,500 per annum. This for a 35-year-old will be available only for 40 years and with a premium of about INR 15,000 per annum.
You will be more confident when you start investing early. Learning and earning along is a way to gain confidence to invest wisely over time.
Things to ensure when I start early?
• Do your own research
Make sure you do your own research and not to follow anyone blindly. As I mentioned earlier the best way to learn is to do it yourself. In course of research, you will learn what is the best source to depend upon. So, talk to people, surf the web, read up and learn as much as you can as early as you can.
• Invest what you can afford
Make sure you start with an amount you can afford to invest. It should be an amount which you can put completely at risk. Fortune favours the brave and when you know what you can invest it will do wonders for you and give you full confidence to plan the investment. Any amount which enters the discomfort zone should be avoided always.
• Keep elders informed
Before you take the plunge, if the amount is significant in your view, please keep the elders informed. An FYI can help at a later stage 🙂
How do I kickstart?
While there are many ways to start investing or planning your finances, you are the best judge. You can start with a Mutual Funds SIP or a term plan or a good health insurance. The choice is yours!
Remember: “Financial independence paves the way for a brighter and comfortable future, start young”.