The Importance of Investing: Why You Should Start Early

There are a lot of different reasons why investing is important. For one, investing can help you reach your financial goals quicker. When you have specific financial goals in mind—like saving for retirement or buying a house—investing can help you get there sooner than if you were just saving your money in a savings account. 

Another reason investing is so important is that it can help you protect your finances from inflation. Inflation is when prices rise over time, which means your money buys less than it did in the past. For example, let’s say you have $100 in your savings account and inflation is at 2%. This means that after one year, your $100 will only be worth $98 because prices have gone up by 2%. 

Why You Should Start Investing Early

One of the best reasons to start investing early is that it gives your investments more time to grow. This concept is known as compounding, and it’s basically when your investments earn a return and then those earnings start earning their own return. The earlier you start investing, the more time your money has to grow through compounding. 

For example, let’s say you invest $1,000 today and earn a 10% annual return on your investment. After one year, you would have $1,100 because you earned 10% on your original investment of $1,000. But in year two, you would actually earn 10% on $1,100—not just on your original $1,000 investment—giving you a total of $1,210 at the end of year two. And in year three? You guessed it: You would earn 10% on that larger number too, giving you a balance of $1 331 by the end of year three.  As this example shows us, each year that goes by gives you the potential to earn more money because you’re not just earning returns on your original investment—you’re also earning returns on any previous earnings as well. 

Investing isn't risk-free but diversification can help mitigate some risk] 

Conclusion: Why Everyone Should Consider Investing Investing offers a lot of benefits that can help people reach their financial goals quicker and protect their purchasing power over time. While there are some risks involved with investing—including the possibility of losing money—diversifying your investments can help mitigate some risk while still giving you the opportunity to earn strong returns. Whether you're looking to save for retirement or something else down the road, investing should be part of your overall financial plan. And there's no better time to start than today!