Start Investing When You're Young

It's never too early to begin investing. Invest while you're young and make the money work for you. Investing $100 at a 10% return makes $10 without any effort on your part. As the investment grows from interest, so does the return. The first year's interest of $10 adds on and your principal becomes $110. The second year, you get interest on this amount and receive $11. This is the magic of compounding. If you have 40 years to retirement, you'll accumulate $4,525.93 and then $11,739.09 in 50 years. The return on that amount for one year is $1174, a lot more than the original investment.

The extra years allow you to invest in assets that reap higher returns. If you're young and the investment drops, you have time to wait for it to turn around. The older you get or the closer you come to needing the money, the more you need conservative tactics. An investment in the stock market yields a lot higher return than fixed investments like bonds and CDs. The percentage often is double or triple that of a savings account. Since you compound the interest, the return after 40 years varies by huge amounts.

There are simple ways to begin investing. Put aside $4 a week by drinking your own coffee a couple of days, rather than buying a cup of fancy brew. These few dollars, set aside, become more than $200 at the end of the year to invest and can add as much as $22,000 to your retirement funds. How? You use the magic of compounding that $200 through the years. If you're on a tight budget, save money on groceries with coupons and have a little to invest each week. A 50-year-old needs to give up eating entirely in order to put away enough to have the same amount of money at retirement. They don't have the value of time on their side.

Begin early. Use your investment for major purchases and pay it back in the form of payments. Find out how much interest you'd pay if you borrowed the money and make a payment book. Every month write yourself a check and replenish your funds. When you stick to the plan, you saved the interest paid to someone else and have a way to replenish your investment. If the interest rate from the outside lender is lower, borrow the money from them. Those with a nest egg get a much better lending rate. Once you have money set aside, you find ways to save on interest and make your money work for you.

It doesn't take much to start investing. A few dollars set aside is all that is necessary. You even can take advantage of the companies that offer direct stock purchase programs and become a stockholder with a small amount of money. Don't wait, every year you wait to begin may be the difference of thousands of dollars when you are ready to retire.