Are you worried you're too old to start investing? Then this week's episode of Money Girl is for you. She's breaking down 8 things you should know about investing in a brokerage account. But first and foremost, let her put your mind at ease about when to start investing:
I always say that starting small is better than not at all when it comes to investing. No matter how much or little money you have, it's better to start investing sooner so your money begins growing. Consider two people who invest the same monthly amount and receive the same average annual return.
The first is Sarah, who begins investing at age 35 and stops at age 65. Over those 30 years, she invests $400 a month and receives an average return of 7%. When she's ready to retire, her account balance is less than $500,000.
The second investor is James, who begins investing at age 25 and stops at age 65. He also invests $400 a month and receives the same average return of 7%. But James ends up with just over $1 million after those 40 years.
By starting to invest ten years earlier than Sarah, James retires as a millionaire, with over $500,000 more to spend, even though he only invested $48,000 more ($400 x 12 months x 10 years) than Sarah. James has a much higher account balance because his money had more time to compound and grow.
So, even if you don't have $400 a month to spare, start investing some amount right now. As you earn more money, you can invest more. And when you have a windfall, such as a cash gift, bonus, or tax refund, invest it, too.
Waiting for the perfect time to invest causes you to lose significant earnings. And trying to catch up later will be extremely challenging and costly. So, never forget that the sooner you start investing regularly, the more wealth you can build with less effort.
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