Why do we have to save money?
Money has only one language, you save me today I will save you tomorrow!
We need to save money to cater to our future requirements which may be far exceeding our income. It may be our children’s education, their marriages, our retirement corpus, or buying a house, to name a few. Let’s call these requirements as financial goals.
Is saving money sufficient to achieve our future financial goals? No certainly, not.
We need to invest the saved money to not only beat the inflation (losing purchasing value of money over time) but to make it work for us 24×7, 365 days to be able to achieve our financial goals in a given time frame. The sooner we start investing our money, the better it would be.
So let’s see the advantages of starting investments early in our life
- Inculcating the habit of investing. Investing a small part of your pocket money, your salary, stipend or gifts can go a long way in inculcating the habit of investing and bring in financial discipline.
- Power of Compounding. The sooner you start investing, the longer you remain invested and thus the power of compounding will do its magic. Investment of Rs 1000/- pm @ 12% RoI starting at the age of 25 years up to 60 years of age will create a whopping maturity corpus of approx 62 lakh (against a total investment amount of Rs 4.2 lakh). A delay of five years in starting this investment will reduce the maturity amount by almost half to approx 34 lakh.
- Afford to take higher risks. Due to less or no responsibilities and longer time available for investments, a higher amount of risks may be taken to generate higher returns during the initial years of investment, which will ultimately create enormous wealth in times to come.
- Save less to achieve Financial Goals. You will have to save less to achieve your financial goals if you start investing early. For example, if you need Rs 25 lakh for your daughter’s education after 20 years, you need to invest only Rs 2800/-pm from today assuming 12 % annualized returns vis-a-vis Rs 5300/- if you delay your decision by five years.
- Start investing early, invest for a long time
- Make money work for you by choosing the right asset class
- Instead of playing it safe, play it smart
- Financial awareness gives more options to invest smartly
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