Is College Too Early to Start Investing?

Hi Dreamers,

It's with great excitement that we present our second guest post from our good friends at Debt.org. "Debt.org is America’s Debt Help Organization, serving the public with thorough and accessible information on financial well-being. We strive to help people in all stages of life, from college, through buying or selling a home, and into retirement. Whether an individual wants to plan for the future, get out of debt or stay out of debt, we can help".

Investing is a great way to build wealth and develop good financial behaviors. Ideally, you will want to start this process when you are young — yes, even in college — because it can be beneficial for many reasons. Here is a look at some of the ways it benefits you:

It helps you build discipline

Investing requires you to save a portion of your income. Typically, you can allocate part of your pay to a 401(k) or IRA account. By doing this, you can save on taxes, as well as develop good financial behaviors that can help you build wealth.

Investing early provides flexibility

Investing can be risky and it’s likely you will incur some losses over time. However, by starting early and learning more about your options, you can limit its effect. This gives you the freedom to learn from your losses so you can make better decisions. It also allows you the chance to take more risks, which could pay off well in the right circumstances.

You will have a safety net

If you find yourself unemployed one day, having an investment account can help. While it’s not ideal to use these funds for this reason, if you get into a bind at least you can use these assets instead of relying on accumulating debt. It’s important to note that if you withdraw early from a 401(k) or IRA account, you will have to pay taxes and fees, which can take a substantial chunk of your funds. Therefore, while this can be an option in a pinch, try to make it your last one.

Investing early provides opportunity

Say you want to buy a home or start a business. By investing early, you can accumulate enough wealth to take advantage of these opportunities. As a result, this discipline of saving early can pay off later in life.

You can take advantage of employer’s benefits

Many companies still offer their employees matching contributions on their retirement accounts. This is free money you can use to invest. Over time, it can help build your wealth quicker. Now it’s important to note all employers cap the amount they will match, and they require you to stay with their company for a certain amount of time before you are fully vested. Therefore, be sure to look at the terms in your employee handbook.

It can prepare you for a peaceful retirement

The goal of investing is to accumulate enough wealth for a comfortable retirement. By starting this process early, you will have the chance to build more wealth with fewer contributions. Even during a tough economy, you can have confidence in knowing that your commitment to investing will pay off long term.

Ultimately, the earlier you can invest the better. It helps you build discipline, as you have to save a part of each paycheck. Additionally, it can help you weather bad economic conditions and provide you with the wealth needed to take advantage of any opportunities down the road. Furthermore, it can help you build the wealth needed for a well-deserved retirement.

Jeffery Sterner writes and blogs about personal financial well-being and issues that influence it for Debt.org, America’s Debt Help Organization.

Disclaimer:

Notwithstanding any language to the contrary, the views expressed in this post reflect those of the author and are solely theirs and do not reflect the views of Developing Responsible Economically Advanced Model-Citizens, Incorporated or any affiliates. Opinions are based upon information the author deems reliable but Developing Responsible Economically Advanced Model-Citizens, Incorporated does not warrant its completeness or accuracy and should not be relied upon as such. Neither the author nor Developing Responsible Economically Advanced Model-Citizens, Incorporated guarantees any specific outcome or profit from recommendations presented and you should be aware that losses may occur following any strategy or investment discussed. This material does not take into account your particular investment objectives, financial situation or needs. Before acting on information in this post you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser. 

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