You don’t need a six-figure salary to start building wealth. You don’t need to “time the market” or know the latest stock trends. What you need is time. And the earlier you start investing, the more time you give your money to grow.
That’s the magic of compound interest. Albert Einstein reportedly called it the eighth wonder of the world. It’s the simple but profound concept that turns small, consistent investments into a fortune…if you let it work long enough.
If you’re young (or even just younger than you’ll be tomorrow), now is the best possible moment to start investing.
Here’s why it matters so much, and exactly how you can begin.
Why Starting Early Changes Everything
Let’s say you invest $200 a month starting at age 22 and stop at age 32. You’ve only invested for 10 years – just $24,000 total. But by the time you’re 65, that investment could grow to over $250,000 (assuming a modest 7 percent average annual return). And that’s with no additional contributions.
Now compare that to someone who waits until they’re 32 and invests $200 a month all the way to 65 – 33 years of investing. They’d contribute nearly $80,000, but their account would grow to about $270,000.
Do you see the difference? The early starter contributes less money, but ends up in nearly the same place. Time did the heavy lifting for him. That’s the power you unlock when you invest young.
How Compound Interest Works
Here’s the simple version: When you invest money, it earns money. The next year, you earn returns on both your original investment and the returns from the year before. The longer you leave that money invested, the more it snowballs.
It’s not about how much you start with. It’s about giving your money enough time to multiply. That’s why time in the market almost always beats timing the market.
Even if you’re only investing small amounts right now, starting early gives your money decades to grow – so each dollar becomes exponentially more powerful.
The Benefit of a Long Runway
When you start early, you don’t have to take big risks. You don’t need to make huge contributions. And you can recover from mistakes more easily.
The market will go up and down – no question about it. But long-term investors have history on their side. Over nearly any 20-year period, the stock market has delivered positive returns. Starting young means you get to ride out the storms and still come out ahead.
You also have more flexibility. Want to retire early? Go part-time? Start your own business? Investing early gives you options that most people don’t realize they’re missing until it’s too late.
How to Start When You Don’t Have Much Money
You might think investing is only for people who already have a lot of money. It’s not. Thanks to modern tools, you can start with as little as $5 or $10.
Work with a financial planner to develop a plan that works with your financial goals. Then turn on automatic contributions so you’re investing a few bucks every time you get paid (without having to think about it).
If your employer offers a 401(k) or similar plan, start there – especially if they offer a match. That’s free money. So, whatever you do, make sure you contribute enough to get the full match, then consider adding to a Roth IRA or another low-fee investment account on your own.
Choosing the Right Accounts
When you’re investing for the long haul, where you invest matters almost as much as what you invest in. The goal is to grow your money while keeping as much of it as possible after taxes and fees.
Here are three account types to consider:
401(k) or 403(b): Offered by many employers, these accounts let you invest pre-tax income, lowering your taxable income now. Many companies also offer a match.
Roth IRA: You contribute after-tax dollars, but the money grows tax-free and you can withdraw it tax-free in retirement. Great for young investors who expect to be in a higher tax bracket later.
Brokerage Account: These are taxable, but they’re flexible. You can access your money anytime without early withdrawal penalties.
Start with what’s available to you. If your job offers a retirement plan, take advantage. If not, a Roth IRA is a great place to begin.
Stay Consistent, Not Perfect
Want to know a secret? Most successful investors aren’t geniuses. Truthfully, they’re just consistent. They invest a little every month and don’t panic when the market dips. In that same vein, they don’t try to guess the next hot stock. They just stick to their plan and let time do the work.
The best thing you can do is set up an automatic transfer from your checking account to your investment account every payday – even if it’s just $25. Treat it like a bill you pay to your future self.
Some months will be tight and some years will be volatile. But if you stay in the game, your money keeps compounding, growing, and building freedom.
Use Your Greatest Power
If you’re young, your greatest financial asset isn’t your income. It’s your time. Start investing now, even if it’s small. Then, let compound interest do its thing. You’ll want to make a habit of tuning out the noise. Then, watch what happens when you give your money decades to grow.
Read more:
The Power of Investing From an Early Age (Why and How)