Why You Need To Invest Now
What if someone told you give me $24,000 now and I’ll give you a million dollars in 40 years or give me $2,000 for the rest of your life and I’ll give you 800,000 in 38 years. In the latter scenario you spend $76,000 over the lifetime of the investment. The $24,000 scenario looks pretty good to me! This is the power of compound interest and investing early in life.
See the power of compound interest in the infograph.
Not only does the young investor end up with a seven-digit bankroll by the age of 65, but he also invested much less throughout his lifetime than his late-to-the-game counterpart. In fact, by the time the latter had started investing, our young hero found himself able to sit back and watch the dividends roll in without putting another penny of his own money into the equation.
By investing sooner you can earn more interest in your account. It works the same not paying off your credit bill immediately. The longer you don’t pay off the credit card the bigger the balance gets even if you stop using your card. Except the Credit Card interest rate is 20+% vs the 10% in the example from the article. Always pay off something with a higher interest rate then you could earn as a rule of thumb. The S&P 500 has earned about 8% per year over the last few decades.
Learn why you should start investing as soon as possible in this picture.
About Shaun Archer Tatum Shaun works in corporate finance in New York City. He has done financial consulting for several start-ups and has worked at several Fortune 500 companies. He has contributed several finance/investing articles on Seeking Alpha which have been published on Yahoo! Finance.