Why Should You Save When You’re Young?
Why should you save when you’re young? Well, who better to ask than one of Cabana’s youngest? – our intern, Andrew Henn.
Wish to retire early? Who doesn’t? I have always been taught to save as much money as I can – whether it was birthday money, Christmas or graduation my parents discouraged spending and pushed me to save. While the idea has been delivered to me time and time again, I never understood how much it would, and still can, help prepare me for the future. At the young age of 22, still in school, interning here at Cabana and studying finance, I have opened my eyes to the investment world and have come to understand the power of saving and investing my money.
While I was lucky enough to have parents who pushed me to save at a young age, and continue to teach me how to invest it today, now that I am older, I look back and my only regret is that I had saved more.
Not convinced yet? In the graph below, I will show you how the power of time can be one of the biggest advantages for an investor. In sum, I will show you why you, your son or your daughter should start investing NOW!
I have taken the average of Cabana’s Conservative Portfolio performance (our least aggressive or “risky” portfolio) over the last 10 years, which came out to be +8.78%. Although the numbers listed in the graph are not a guarantee of future performance, they do show how the portfolio has performed in the past. These numbers, along with more information on our portfolios can be found at www.cabanaportfolio.com under the Asset Management tab.
Please note: Dependent on your situation and your level of risk tolerance, your portfolio choice and returns could vary.
The below chart serves as a hypothetical investment plan. On the left-hand side, you’ll see that I started investing at the age of 25. If I were to invest $5,000 each year from age 25 to 35 (a total of $55,000), and not invest again, those investments could be worth $773,844 by the time I am 60 years old (my hypothetical retirement age). Looking at the right-hand side, you will notice that if I started investing at age 35 and continued to invest the $5,000 each year until I reach 60, I would have invested a total of $130,000 and my total return at the age of 60 could be just over $490,511. As you can see when comparing the two scenarios, those ten years can really make a difference – not only when it comes to returns, but also factoring in the total amount of money invested.
If you are thinking about helping your children learn the basics of investing early, or you yourself are deciding if you should start saving some spare change each month, you can and should start today. If you know someone who is just starting their career, please feel free to share this post with them, or connect them with one of our advisors so that they too can reach their financial goals! I know firsthand how important it is to have this knowledge before it’s too late.
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