Do you wait to invest until you have larger sums to do it with? Or when you feel more confident? Or when everything calms down? To each of those questions the answer should be: no. The reason is because of the power of compound interest and time in the market.
To explain, let me to tell you the tale of three sisters who each wanted to invest in the share market. These three sisters were able to save $500 each per month, but each had different ideas on when and how to start.
Elain was cautious with her money, placing her funds in a high interest savings account while she waited for the perfect time to invest. She never felt comfortable, and so after 30 years her savings were worth $347,025.
Next was Nesta, who wanted to wait until her ducks were in a row, the kids had left school and she paid down some of her mortgage. With her $500 a month, Nesta initially put that money for the first 20 years into her offset account – where it felt safe. In doing so, she was able to save a massive $231,020 in interest. After 20 years, Nesta finally felt comfortable to invest and she did this with the $500 a month, earning her $101,258. After 30 years, Nesta had both saved in interest and invested $332,278.
Finally came Feyre. Feyre was a My Financial Adulting Plan alumni who understood that it was about time in the market, and so she didn’t try to time when she started investing or wait until she paid off her mortgage. She felt nervous about investing when times were so uncertain but she understood she was investing for the long term and there would be highs and lows during that time. At the end of 30 years, after investing in a broad based ETF every single month, Feyre had a whopping $1,083,143.
Now, you might read those three examples and argue that:
- You don’t have enough money to invest or
- You don’t know how to invest or
- You want wait to invest until after you’ve paid off the mortgage, the kids have left school, Trump is no longer in office, the world feels calmer, pigs are flying…
I want to strongly urge you to rethink. That’s because the longer you delay starting, the more you need to invest simply to end up with the same amount as if you started now with a much smaller amount. It’s thanks to the power of compound interest.
Let’s be honest, most people could find small amounts. Most people could find $100 a month, $200 per month or even $500. But too often we’re fixated on paying off the mortgage, or we’re focused on kids’ schooling or maybe we’re pressing pause because there’s so much uncertainty.
Instead, it’s choosing to understand about investing, choosing your time frame (which should be more than 5-7 years if it’s the share market), choosing your investments and automating regular amounts. However, I get that most of us didn’t go to school and complete a class called ‘Money’. I also get that everything is googleable but the sheer volume of information can be overwhelming.
That’s why I’ve created a free guide called 25+ ways to find $10k in 12 months to help you find money to start investing. It’s under freebies on my website. And a Shares Investing Masterclass where you can learn everything you need to know about investing in less time than it takes to read a fantasy book or watch a rom com.
I know that it can feel overwhelming but I hope you can see from the examples above that the rewards for just starting is worth it.
