This is a financial mistake that many young working people commit unknowingly. At the beginning of their career, they give priority to expenditure rather than investment and think that they will start investing later when their income increases. But by the time they start investing, the most valuable time for compounding has passed.
A simple calculation shows that if a person starts a monthly SIP of Rs 10,000 at the age of 30 instead of 25, he can have around Rs 2.42 crore less by the time of retirement. Whereas the difference in the total investment of both is only Rs 6 lakh.
Why don’t youth start investing early?
Suppose a 25 year old youth starts a job and his salary is Rs 50,000 per month. He has neither any loan nor any big responsibility. He can easily invest Rs 10,000 every month.
But often new bike, new smartphone, traveling and lifestyle expenses outweigh the investment. Most people think that if the salary increases then they will invest later.
Thinking changes at the age of 30
By the time one reaches the age of 30, the salary may increase to around Rs 1 lakh per month, but responsibilities also increase. Goals like marriage, plans to buy a house and children’s future come to the fore. Then the person starts the SIP, but he has already delayed it by 5 years.
How big is the impact of 5 years delay?
If a person starts a SIP of Rs 10,000 at the age of 25 and invests for 60 years, his corpus can be worth around Rs 5.5 crore at an expected return of 12% per annum. At the same time, if started at the age of 30, the same SIP can create a fund of around Rs 3.08 crore. That means, by investing just Rs 6 lakh additional, an additional corpus of around Rs 2.42 crore can be created at retirement.
magic of compounding
The biggest reason for this difference is compounding. This means that the returns you get on your investment also start earning returns in the future. The more time you get, the faster the money will grow. The first Rs 10,000 invested at the age of 25 gets a chance to grow for 35 years, while the same money invested at the age of 30 grows only for 30 years.
most important lesson
There is no need for a big salary or a huge amount of money to start investing. The most important thing is to start on time. Financial experts believe that starting to invest even with a small amount early is better than starting to invest with a large amount late. Many times, when you start investing is more important than the amount of investment.
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