Everyone thinks that young people need to be told to invest, but that’s not always true. Many young people know the value of investing, but just don’t see it as a priority. Planning for the future loses out to getting through the present.
That said, investing is actually really important in your twenties and thirties, as it gives you more time to make the most of what you have. It may not feature in many people’s dreams, but it is worth remembering that investing is a tool that could help you make your dreams happen. Here are three reasons to start thinking about investing.
1. You’re already doing it
Investing is a way to save money. In a recent Fidelity survey, we discovered nearly 50% of people aged from 20 to 34 don’t realise that their retirement savings are invested1. But if you have money in a company pension, you’re already investing.
The difference between you and “investors” is that they’re actively thinking about the returns on their savings. If you’re thinking about your future and wondering how your savings will ever make your long-term goals happen, investing could be for you too.
The first step is to look at your pension. Just log in to PlanViewer to check your balance and learn more about what you are contributing and where your savings are invested.
2. Small amounts make a big difference
They say it’s the little things that count. And that's certainly true when it comes to investing for the long term. Retirement might feel like it’s much too far away to worry about, but putting an extra 1% of your monthly salary into your workplace pension each month could make a dramatic difference to the income you’ll have to enjoy life when you’re older.
Just take our 1% challenge to see for yourself how a small change can make a big difference.
3. Time is on your side
When it comes to money, this is a tricky time to be a young person. There are student debts, lower real wages, higher house prices, increased wealth concentration and a tougher jobs market – plus Brexit fears and a global pandemic that has affected 18 to 34 year-olds’ finances more than those of any other group in the UK2.
Fortunately, you’ve got one big advantage – time is on your side. The longer you invest in the market, the more opportunity there is for your money to grow. This all comes down to the benefits of compound interest, which means you don’t just get interest on your initial investment each year but on all the interest you earned in previous years – or, to put it another way, interest on interest. The longer this process goes on, the more it can potentially achieve. So, the earlier you get started, the better.
Source: Fidelity International, for illustration purposes only, actual performance will vary each year. With simple interest, a set amount of interest is added on every year. Compound interest keeps earning interest on the initial investment plus all the interest on the interest that has accumulated over time.
Make a start, however small
It’s easy to assume that young people lack experience when it comes to investing. After all, there’s minimal financial education in schools and it can be further down the priority list than a career and life goals. But you don’t need to be an expert to start investing for your financial future. There’s lots of help out there and starting sooner rather than later might be the difference in making your future dreams come true.
1 Fidelity Global Retirement Survey, 2019.
2 Fidelity International, June 2020, based on a sample of 1,000 independent UK investors during May 2020.
Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in a pension and tax treatment depends on personal circumstances and all tax rules may change. You can't normally access money in a pension until 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.