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Why You Should Start Investing in Your 20s

May 16, 2019

If you’re in your 20s and thinking, “I have no savings, how can I think about investing?” you’re not alone. According to one survey, 44 percent of people ages 18 to 24 have no money in their savings accounts or they don’t even have a savings account.*

There are no secrets or gimmicks involved with saving and investing. And you don’t have to be a financial genius — you just have to make a plan and stick to it.

Make Smart Moves

You might feel like you’re not making enough money to invest, but you don’t need a lot to get started. Here are some reasons why it’s a good idea to begin investing when you’re young.

It’s less painful to start early. When you begin saving a portion of your salary in your 20s, you’ve got a better chance of making it a lifelong habit. Plus, if you treat saving money like any other monthly bill or expense you have to pay, you won’t miss spending the extra cash. Setting aside money from your monthly budget now is easier than making cuts down the road, when you might own a home or have a family.

You’ll enjoy the benefits of compound interest. You might be thinking that you have plenty of time to invest. But the timing of when you start saving matters more than how much you invest. Someone who starts saving at age 25 instead of age 35 will end up with greater wealth over time.

You can ease into it slowly. You can start by saving 1 percent of your income and gradually increasing the percentage by 1%. By the time you’re in your 30s you’ll be saving 10% of your income. You’ll be saving 20% of your income when you’re in your 40s.

Automated transfers make it easy to save. Consider participating in an employer-sponsored 401(k) or opening up an individual retirement account (IRA) or brokerage account. With a 401(k), your contributions are automatically deducted from your paycheck, so you don’t even have to think about it. You can set up recurring transfers to automate your IRA or brokerage accounts, too.

You can tolerate more risk when you’re young. When you invest regularly and carefully, you can ride out any market fluctuations more easily than you can as you get closer to retirement.

Look at the big picture

It’s important to consider your entire financial situation since expenses like student loans and credit card debt can impact your ability to save. Think about using your money as a way to achieve the lifestyle you want. Then make smart decisions about spending, saving and investing.

To speak with a financial professional at PeoplesBank about ways to save, contact us today!

* Source: GOBankingRates

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