Ask any financial advisor and they will tell you to start saving whatever you can, right now. The earlier the better. In fact, teach your children to save from a young age: have separate piggy banks or accounts: one for fun things and the other so they can be better financially positioned in an ever-changing world.
Money management is a skill that can be learned and should be taught over time from a young age. Yet most Canadian adults do not know some of the basic facts of saving. There still lingers a prevailing misconception: “That if you don’t have much money to invest now, it’s better to contribute more later,” according to a Fidelity Investments blog post.
Yet the best way to accumulate wealth is to get started early, even if just saving a small amount.
“It’s hard to find the motivation to start investing when you’re young, which is why a lot of people put it off until they’re further along in their career,” per the blog.
The blog provides an example of two different individuals who invested at different times in their lives. The person who got started 10 years later and invested twice as much money was still unable to catch up to the level of the early investor who invested less.
It is all about compounding your investment over time, which means that over the span of years and with annual returns, investments can wield greater oomph.
It is a bit like planting a tree and allowing it the gift of time, rather than planting one and hoping that it will grow massive in months with the use of copious fertilizer.
When it comes to investments, and growing trees, time is a pivotal piece of the equation.
Out of all the things we can do in life to better position ourselves and our children, it seems a small step that can have big rewards.
In fact, a survey of incoming freshman college students in the U.S. found that the majority were lacking basic financial literacy, and averaged answering only two of six questions correctly.
“Part of that lack of understanding may come from the fact that many students have not been formally taught about managing their finances. Overall, the survey found that just 40 percent of four-year students and 45 percent of students attending two-year institutions had ever taken a personal finance course,” according to the article.
An earlier understanding of personal finance and the possibility and power of compounding investments are essential to wealth creation.