Whether you’re young, old, or somewhere in between, investing may not be something that you’ve spent much time thinking about. Instead, you might primarily be concerned with just making enough money to pay your bills, or saving enough to afford your wedding, your first child, or your dream home. At Harvest Financial Planning, LLC, we get it–we know that thinking about how and where to invest your money may not be at the top of your mind. However, investing is important, especially if you want to take steps to grow your wealth over time. One of the most frequently asked questions we hear is, “What’s the best age to start investing?”–here’s what you should know!
Get Started As Early As Possible
Even if you’re not making millions (or anything close to that), it’s important to start investing as early as possible if you are able, even if it’s just a little bit each month. By investing early, you’ll have more years before you reach retirement age to start putting money away, which usually means a bigger pot later on. Most importantly, though, you’ll benefit from compound interest. Compound interest can be described as a type of interest on interest. As interest becomes part of your principal, the same interest rate will yield more money. For example, think about a 10 percent interest rate on $10. If the interest is compounded annually, you’ll earn an additional $1 that year. Going into year two, then, you’ll have $11. 10 percent added onto that is $12.10. You get the picture.
Identify Your Investment Goal
Another thing to think about when you’re thinking about when to start investing is your investment goal. After you know what your investment goal is–and when you need to reach it by–you’ll have a better idea of how much you need to invest and when you should start that process.
In identifying your investment goal, you’ll want to consider your overall financial and life plans. For example, do you want to be able to retire the moment you turn 65? Are you planning to save for other major life events, like buying a house, getting married, or having children (and sending them to college)? If so, these will all need to factor into your plan.
Learn More About Your Investment Options
The next thing to do when thinking about what age to start investing and your investment goals is to consider your investment options. What makes the most sense for you? An IRA or a Roth IRA is a great option, and 401(k)s are awesome, too. For those who are self-employed, a SEP account may make the most sense.
Hire an Investment Advisor to Help
Making sense of all of your options and understanding the best time to invest can be a little confusing. To assist you along the process and help you to make smart choices, call a financial planning professional from Harvest Financial Planning, LLC. We offer free consultations to our new clients.