Michael Gruen is co-founder and VP of Talent at TalentX and a blockchain, DeFi, CPG, SoMe Tech and entertainment industry entrepreneur.
Years ago, talk of investing brought to mind gray-haired men in suits exchanging stock tips or shaking hands after closing a lucrative deal. Many young people weren’t interested in putting money away when their good-paying jobs generated steady paychecks and there were nights out and new cars and clothes to be had — not when life was happening in the here and now!
Young people today think differently about investing. I’d like to think it’s because we’re wiser and more mature, but the reality is that current technology has made this sort of investing possible and recent events have made us realize how important it is to build long-term wealth — most recently, the coronavirus pandemic upending people’s job prospects and financial security. A June 2020 survey revealed that 75% of Gen Z-ers and millennials are planning to invest. This is promising news. As a social media influencer who became a young entrepreneur and investor, I’m a firm believer that you’re never too young to put your money to work for the future — whether you invest in stocks or take the leap and invest in a company.
Although most young people haven’t reached the pinnacle of their careers or earning power, I’d argue that they’re the ideal investors. Here are the reasons young people should be investing right now.
Time Is On Your Side
As a young investor, time is on your side in many different ways. First, young people tend to have ample amounts of free time in their day-to-day, which can allow you to really dig in and research the best investments and track current trends. More importantly, any money you invest now has more time to grow before you’ll likely need it. It’s much better to invest a smaller amount of money now than a larger amount later to generate the same return.
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You’ll Build Better Financial Habits
If you’re focused on investing, the kind of reckless spending habits that are often associated with young people simply won’t work. Spending time to research and carefully invest will make you much more cognizant of money coming in and going out. Is it better to spend that $1,000 on a weekend away or put it to work for your future?
You’re In The Best Place To Take A Leap
While it’s a great way to build long-term wealth, investing is inherently risky. Therefore, it’s best to take that risk when you’re young and can bounce back relatively quickly should things not go your way. Once you have a spouse, kids, a mortgage and other responsibilities, you’ll likely become much more risk-averse and less likely to be able to take the kind of leap that will really pay off.
You Can Bounce Back
As mentioned above, investing can be risky — especially if you’re putting up a large amount or heading into uncharted territory by backing a startup or even starting your own business. If your investment fails, taking the chance when you’re young means you have time to regroup and try again. And again. And again. Any successful entrepreneur will tell you that they only learned by making mistakes, and the same applies to investing.
A Few Things to Keep in Mind
Even though time and circumstances make young people the ideal investors, it’s still important to invest responsibly. If you have high-cost debt (like credit card debt), you should tackle that first before putting a large amount of money into any investment. In addition to paying down debt, it’s a good idea to build a financial cushion you can fall back on in emergencies. Three to six months of living expenses is ideal — enough to cover your rent, food, utilities and any loan payments.
With debts in check and a safety net in place, invest! When you’re young, you have the entire world ahead of you and a lot to potentially gain.