Investing as a Student: Start Smart, Start Soon

You may have grown up hearing whispers from people saying to start investing young. This advice is meaningless to all of us before we add some numbers to it.

Here’s an example. If you invest 250 dollars a month, from the age of 20 until the age of 65, you will end up with a hypothetical $1,075,407.31 when you retire if it was invested at 7.5% with semi-annual compounding.*

Conversely, if you waited until the age of 30 to start investing, with everything else the same you’d only end up with $493,836.66 at retirement, which is a massive $581,570.65  difference! These few years amounted to an extreme amount of money.

Another way of looking at this would be to get the same amount of money as starting at 20 when you start at 30, you need to invest $544.41 per month as compared to the $250 per month if you had started at 20. This almost $300 change in monthly payments could dramatically impact your lifestyle.

Why does it pay so much to start earlier? Compound interest. If you have not heard of this concept before, it is the idea that the interest you earn on your money has a longer time to generate more interest itself. With more time, you allow interest to passively earn you money.

Less work for more money? Just one reason to start now if you haven’t already. Strapped for cash? Budgeting even 50 dollars a month (eating out + a few Starbucks trips) will set you up for future financial freedom down the road.

Considering you are studying at University to prepare yourself for advanced job prospects, security, and satisfaction, it is also important to consider your decisions with money. Your choices now can allow you to do more of the activities you enjoy in life later without worrying about money in the back of your mind.

*You can learn to make these calculations by using a financial calculator