You should really start investing right now.
It doesn’t matter how much money you have. It doesn’t matter how old you are.
It doesn’t matter how much you know about investing, or whether you’re worried about what the markets are going to do, or whether you’ve never even heard of “the markets.”
You should start investing now, no matter what. Here are seven reasons why.
Reason No. 1: Your Freedom Is at Stake
Investing isn’t about getting rich. It’s about one day having the financial freedom of being able to support yourself without an income.
Because here’s the truth: At some point you’re going to have to stop working. The only question is whether you’ll be forced to stop before you’re financially prepared, or whether you’ll be able to choose to stop on your own terms.
And the only person who can make sure you’re able to do it on your own terms is you. Nobody is going to give you the money you need to support yourself without an income. Beyond Social Security, it’s all on you to save up as much as you need.
So your freedom really is at stake here. And there’s no better time to start creating it than right now.
Reason No. 2: Free Money
If you work for a company that offers a 401(k), there’s a good chance they also offer some kind of employer match. That simply means they will match your 401(k) contributions dollar-for-dollar up to a certain point.
For example, a typical employer match might be something like 100% of the first 3% of your salary that you contribute. That means that if you contribute 3% of your salary to your 401(k) each paycheck, your employer will also contribute 3% of your paycheck on your behalf — on top of your regular salary.
That’s free money! In this example, you would immediately double your retirement savings just by being willing to save a little bit. It’s the best return on investment you’ll find anywhere, and it’s absolutely something you should take advantage of if you can.
All employer matching programs look different. Yours may be more generous than the example given here, or it may not be quite as good. And in some cases you may not have one at all.
To find out, just ask the HR rep at your company whether they offer a 401(k) employer match, and if so, how it works. Then you can adjust your contribution percentage if necessary to make sure you’re taking full advantage of it.
Reason No. 3: It Doesn’t Matter If You Mess Up
A lot of people never get started investing because they’re worried about making a mistake. It feels like this big, complicated thing you have to spend a ton of time and energy on to get right, and if you don’t then you might lose a lot of money.
The truth is that for the first decade or so of your investment life, the returns you get really don’t matter very much. Good or bad, they just won’t have much of an impact on how much money you end up with.
What does matter, a lot, is your savings rate. The more you save early on, the more money you’re likely to end up with, even if your returns aren’t great during those early years.
Which is actually great news for you! Because it removes all the pressure of having to choose “the right” investments and all the risk of making a big mistake.
Even if you mess up and don’t get the returns you should have, you’ll be OK as long as your savings rate is where it needs to be.
So don’t let fear or self-doubt keep you from getting started. The very act of getting started is much more important than getting it right.
Reason No. 4: Practice Makes Perfect
With that said, as time goes on and your money grows, your specific investment decisions are going to become more and more important. The more money you have at stake, and the less time you have between now and when you need it, the more important it is to make smart investment decisions.
And the sooner you start, the more time you’ll have to practice making those decisions before they really begin to matter. You can learn as you go and make mistakes now, giving you the skills and experience you need to make the right decisions later on.
Reason No. 5: Compound Interest
“Money makes money. And the money that money makes, makes more money.” –Ben Franklin
Let’s say you invest $1,000 this year and it earns a 10% return. That means you make $100 and you’re left with $1,100 in your account.
Now let’s say you can’t contribute anything the next year, but you still earn that same 10% return. Well, instead of $100, you’ll actually earn $110 because that 10% return is on your new, bigger $1,100 balance.
That is the power of compound interest. Without you having to do anything, your money keeps earning more and more money all on its own.
It’s also the real power of investing, and the longer you expose your money to the power of compound interest, the bigger the gains will be.
Reason No. 6: Starting Can Be Easy
Investing doesn’t have to be super-complicated or time-consuming. And you don’t have to be rich either.
There are plenty of easy ways to get started without having a ton of money and without being the world’s foremost investment expert.
One way is to start with your 401(k) match, like we talked about above. It’s simple, it’s quick, there are no minimum contribution requirements, and of course it’s free money! Who doesn’t like that?
You could also open an IRA with a place like Vanguard or Betterment, both of which give you access to high-quality investments at a low cost. And you can keep your investment strategy simple and powerful by using index funds.
The resources are out there to get started with a great investment strategy, even without much money or knowledge.
- Related: Best IRAs for 2019
Reason No. 7: There’s No Time Like Today
“The best time to plant a tree was 20 years ago. The second best time is now.” — Chinese proverb
All of this obviously applies if you’re in your 20s or 30s with decades before retirement. But what if you’re a little bit older than that? Is it too late to start?
You can’t change what’s already happened, but you can start doing things differently right now. And every little bit counts. No matter where you are in life, you should start investing right now.
Remember, your freedom depends on it.
Matt Becker is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the most important financial decisions that come with starting a family.