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6 reasons why you’re never too young to start investing or saving


By investing earlier in life, you can gain lifelong financial skills.

Sponsored by InvestSMART Fundlater. Own a $10k investment portfolio with only $4k up front. Use code FINDER to receive a free investment Bootcamp course: when you fund your account using Fundlater before December 31. Borrowing to invest can increase your risk, view our PDS, TMD and T&Cs.

It's no secret that Aussies aren't taught the basic financial skills that will help them throughout their lives.

Instead of learning about compound interest and how to budget our home expenses we learn long-winded equations that aren't practical in most people's lives.

Worse still, most young adults are forced to work it out on their own once they leave the family home.

When you combine the 2, it's not so shocking that Australian households are considered some of the most indebted in the world.

If the foundational skills – like investing and saving – aren't there, debt is going to follow.

There are other barriers, too.

Last year, Finder research uncovered some of the key barriers preventing people from entering the share market:

  • Not being able to afford it – 15%
  • Perceptions of investing being high risk – 12%
  • Not knowing how to invest – 9%

For gen Z, the stats paint an even grimmer picture. Almost 1 in 5 (18%) gen Z Australians won't enter the share market because they don't know how.

But the good news is, you're never too young or too old to learn about finance. In fact, the younger you start, the better.

👋 Hey there! Since we've partnered with InvestSMART for this article, we'll be using its Fundlater product as an example throughout. However, it's important to note that all investments have risks – you should always consult with a financial professional prior to making any major financial decisions

1. You'll build good financial habits

When you start investing at a young age, you're also investing in yourself. You learn by doing, and get a practical education in the process as a result.

"Learning to forego spending today on the smaller things helps in purchasing more important things in the future like a house and fund retirement," Ron Hodge, CEO of InvestSMART Group, says. "It is fundamental to building long-term wealth."

Developing well-rounded financial skills earlier will serve you well throughout your life.

Who knows – you might even get into it and go full FIRE movement!

Hodge points to the Fundlater loan as one of InvestSMART's products that can help young investors get started.

"Fundlater was set up to help younger Australians invest in a larger well-diversified portfolio of low-fee exchange-traded funds (ETFs) which they pay off over time," he says.

Fundlater allows investors to choose from 3 different share portfolios that offer different ranges of growth potential and risk levels. The product requires a $10,000 investment – $4,000 is paid upfront, while the rest is paid gradually over a period of 20 months.

As with any investment, there is risk involved. Markets can experience downward turns, fees may be associated with certain trades and there may be tax implications if you do see a profit. It's important to consider wider market factors before investing and it's important to consider whether you're equipped financially for the attendant risk.

Kid Investor

2. You can take advantage of compounding

"Compounding" is the practice of generating interest on principal as well as interest already paid. It's a very common wealth-building strategy – and while it doesn't tend to generate wealth as rapidly as investment, it is considered a relatively safe strategy.

As Einstein is often credited as saying, "Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it."

The earlier you start saving and investing, the quicker you'll be able to start generating compound interest. In turn, this will set you up for more comfortable circumstances in retirement.

Young woman trading online

3. It's easier to leverage dollar-cost averaging

In its simplest terms, dollar-cost averaging is the practice of placing a preset amount of money into your portfolio on a regular basis, irrespective of wider pricing and market conditions.

One example would be the InvestSMART Fundlater's repayment plan, though it can take many different forms.

Now, there are a few reasons people take this approach.

The first is to lower risk. Some investors go through feast or famine cycles – spending significant chunks of cash to buy in on a hot prospect. But then they don't put anything into their portfolio for months.

Further to this, dollar-cost averaging can also help you build a consistent pattern of investment. Think of it as making regular deposits into your savings account.

Additionally, it actually helps you increase your risk tolerance over time.

By investing rain, hail or shine, you'll become more accustomed to a variety of different market conditions, and – assuming you're paying attention – gain more insight into cycles and prospective booms and busts.

The potential downside here is that dollar-cost averaging can mean that you're not making the maximum possible profits throughout. Lower risk can mean lower reward.

But if you're starting early, you're still giving yourself a lead that will take time for others who came in later to catch up with.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involve substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances and obtain your own advice before making any trades.

4. There's more capacity for risk when you're younger

Just like with your super, younger people are generally able to take on more risk as they have more years left before retirement.

However, Hodge notes that one of the hardest skills to master is the difference between "punting" and "investing".

"The higher the returns, the higher the risks and the longer you should be investing to ride out the ups and downs of the market," Hodge says. "If you expect to double your money overnight, you are punting."

Hodge points to the "Rule of 72" as a simple calculation to help you assess your potential investment.

"For example, if your per annum compounding returns was 8% p.a., it would take 9 years to double your money (i.e. 72/8=9)."

Man reviewing trading figures

5. Inflation can put even "safe" money into a risky spot

High interest accounts and super are "safe" but they also can't be guaranteed to keep pace with inflation either.

According to MoneySmart, the average return in cash in Australia has been 3% over the last decade.

By contrast, the average return in ASX shares has been 6.5%.

Now, this doesn't make it a cut-and-dried issue by any means. There's a significant difference in risk, and that will inform your investment decisions.

Instead, investing can form part of a considered savings strategy.

6. You'll be exposed to a broader range of assets, investment types and platforms

Investment platforms such as InvestSMART / Fundlater often provide access to ETFs (Exchange Traded Funds) and REITs (Real Estate Investment Trusts), which can be a great way to gain exposure to buckets of different shares.

They may be based on a theme like sustainable companies or an index of the wider market. These can allow you to get a feel for the style of investments you prefer, as well as the level of risk you're comfortable with.

However, Hodge says it's always important to do your due diligence before investing with a specific platform.

"The most important elements to any investment platform are to make sure it has low fees, transparent reporting, the ability to automatically add to your investments on a regular basis and enough investment options to enable you to reach your financial goals now and into the future," he says.

Sponsored by InvestSMART Fundlater. Own a $10k investment portfolio with only $4k up front. Use code FINDER to receive a free investment Bootcamp course: when you fund your account using Fundlater before December 31. Borrowing to invest can increase your risk, view our PDS, TMD and T&Cs.

InvestSMART Fundlater T&Cs: *Available to new InvestSMART PMA investors who click from this branded article and fund their account using Fundlater between 1-31 December 2022. T&Cs, eligibility criteria and exclusions apply. Read the PDF and TMD to consider if this product is right for you. InvestSMART will send you instructions on how to redeem the Offer within 30 days of funding your investment. The coupon must be used by 31 March 2023. InvestSMART Funds Management Ltd AFSL 266441.
Name Product Fees Minimum Investment Investment product Number of Portfolios
Spaceship Voyager
$3 a month (on accounts over $100)
Stocks, Cash, ETFs
Invest in Australian shares, global shares and cash markets.

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