Maybe you are very fresh out of college, and enjoying the free time where you have absolutely nothing to do after four, five years of meeting deadlines, demanding school projects and extra-curricular activities.
Maybe you just got your first job, still learning the ropes. And for the first time in your life, you are reaping the benefits of being employed – paycheck plus experience. You are now able to spend for needs and wants without the help of your parents, perhaps even save some for the future.
Maybe you have been working for a few years now. You have a stable life and career, but now you are seeking for more. You begin to ask yourself this question, “What’s next?” Maybe you are even contemplating of putting up the business you have always wanted.
Wherever you are in your twenties, we can agree that this is a time of growth and learning. We have been protected under our parents wings for more or less twenty years. And at this stage, we are gradually spreading our wings to soar on our own.
Slowly, we are eased into the so-called “real world” and are learning to stand on our own feet. We are old enough to make the big decisions for ourselves. And with this, we open ourselves up to a lot of new ideas – some of them we will find scary, some of them we will find very exciting.
One of those “exciting” things I am speaking about is investing.
Let me share with you some points why it is wise to start investing in your twenties.
1. You have time.
When you are in your twenties, time is your BFF. You would not have to fear losing your investment when you are in this point of your life because you have time. Time is a very crucial element when investing because it spells out the difference between investing now and investing ten or twenty years later.
The earlier you open yourself up to investing, the more you will be able expose your money to long-term market earnings. So don’t wait for ten or twenty years from now to start investing. Why? Because later on, you will realize that in the ten or twenty years you spent procrastinating, your investment would have doubled or even tripled. Yes, ten years makes a huge difference.
2. You are learning how to budget.
I know, I know. You would say that you were budgeting since you were in high school, perhaps even in elementary – but this is different! At this point of your life, you want to be independent; you have this desire to be self-sufficient. You want to be able to buy your wants and needs, and maybe even save for the future because you do not like the idea of asking money from your parents; instead, you want to be able to help them with household expenses – you even want to spoil them with gifts as often as possible.
How would you be able to accomplish all of these? This is where your saving and spending pattern come in. And oh my, what a struggle it is to save when there is a beautiful dress displayed in Forever 21 or when there is that PS4 winking at you from across the room!
All kidding aside, this time is where you develop your saving and spending pattern. Develop, being the keyword because the problems you will encounter in your twenties regarding your attitude toward saving can be resolved, only if you choose and decide to. After all, only you can decide to take a step forward and take action. The earlier you commit yourself to saving a portion of your income to invest later, the better off you will be in the future.
3. You don’t have debts.
Before you can start investing, you need to pay off any debts or obligations. In the US, it is common for twenty-somethings to pay off their student loans shortly after they graduate. That is not, however, very common in the Philippines. Generally speaking, we, Filipino millennials, do not have that kind of burden. We are very lucky to have our parents pay for our tuition.
Having said this, you can start with a clean slate. The money you have set aside will not be used to pay off a debt – you can start investing! I’m not even talking about investing in the stock market. Investing your hard-earned money in the stock market when you know nothing about it will do you more harm than good. It doesn’t matter if you’re starting small, as long as you develop the habit of saving and get in the game.
4. You can be aggressive.
Be aggressive! Because, YOLO right? That, and like I said in Number 1, you have time. You do not have to fear market crashes because you can wait it out…or ride it out. Long-term investing solves the problem of market volatility. Do you see how stock prices can go up or down every second or minute? You don’t have to fear that because those are short-term market bursts.
You want visual aid? Proceed to Philippine Stock Exchange website and search for any company that has been in business for at least 10 years. You can try Ayala Corporation (AC), BDO Unibank Inc. (BDO) or Jollibee Foods Corporation (JFC). Look for the Chart tab and click that. See how the prices go up and down? But ultimately, the stock price is heading upwards.
Do you actually lose money in a market crash? No. When the market is down, you can wait it out and wait for it to recover. If you choose to hold on to your investment, you can end up having more than what you originally invested. Like I said, time is your best friend when you are a young adult investor.
5. You take advantage of long-term market earnings.
You reap what you sow. When you start investing regularly for the long-term as early as now, you will be able to enjoy the benefits of long-term investing – compounding and long-term market gains.
Consider this: At age 25, if you religiously save ₱500 per week, you would have ₱26,000 at the end of the year. Now if you invest this, assuming an average growth of 8% per year, your money would have grown to ₱565,000 after 40 years, or by age 65.
Now, imagine investing regularly at age 25, or ₱26,000 and every year thereafter until you retire, still assuming 8% market growth. You will be retiring with ₱6,735,470! All because you started faithfully saving ₱500 per week or ₱72 a day.
6. You get ahead.
Invest while there is still little or no demand for your income. Imagine how hard it would be to save and invest when you are married – eventually you will have kids to send to school and a family to feed. How about bills and medical needs?
Investing gets you ahead because you anticipate a future need instead of just considering the needs of the now. It might not seem important as of the moment, but fast forward to ten or twenty years later, will you still think the same? It is nice to live in the present, but it pays to be prepared. The more prepared you are, the brighter your future will be and those around you.
7. You will lose your money to inflation.
Yes, you actually lose the value of your money by merely putting it in your savings account! You need to know as early as now that there is such a thing as inflation and the longer you put it in the bank, all the more you are guaranteed to lose your money.
I am not saying you pull out all of the money deposited in your savings account right this instant. You need to set up an emergency fund which amounts to your 3 to 6 month’s worth of expenses. You need liquid resources, that is out of question. Keep your emergency fund in your savings account, then invest the rest.
Your twenties is a time of experimentation. Don’t be afraid to commit mistakes. Learn from the mistake of others; learn from yours. Learn all you can. Read. Research. Read again. If you have not started saving, it is never too late. And if you are waiting to be “ready”, you will be waiting your whole life.
Start small, invest now! 🙂