When thinking about investing and stock markets, most students envision older adults putting money into retirement accounts and 401(k)s and such. They may think that they don’t have the funds to start investing now, but in the future when their incomes are higher they might have the means to do so. The truth is that it would behoove these aforementioned students to start investing as early as possible. Here is why: starting early allows the maximum amount of compounding to take place. Having enough time for sufficient compounding to occur is crucial to having a good long-term investing career. A quick Google search will show that the smart move is to invest as much as you can while you are still young.
As you can see from the above chart, starting to invest when you are relatively young and continuing that investment throughout your life will give your investment holdings maximum compounding time. The exciting part of this phenomenon is that the above chart shows the effects through the lens of savings account growth. This effect can be further demonstrated when looking at stock market returns.
Simply put, there is no disadvantage to starting investing early. Come to think of it, that advice can probably apply in a lot of situations. Even as a student, if you can contribute $500 a year to some type of investment and stay consistent with it, you will not regret it in the long-run.
