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How early to start investing and saving?

27 July 2012 Nico-Louis Minnie, an investment specialist at Liberty
Nico-Louis Minnie, an investment specialist at Liberty

Nico-Louis Minnie, an investment specialist at Liberty

One of the biggest secrets to investing is time. The more time you have, the easier it is to create wealth. While we all want to be rich quickly the truth is that very few people achieve quick wealth. For the vast majority, creating wealth is something th

When asked how early one should start investing, Nico-Louis Minnie, an Investment specialist at Liberty says, “as soon as possible and even saving a couple of hundred rand a month will get you kick-started. That hundred a month when you're young is a great start that will make a difference when you're older. Not enough to retire on, but a great start.”

Time also helps with risk. When asked if time in the market helps reduce risk, Minnie responds, "in the longer term the downside volatility - uncertainty or risk - is greatly reduced so taking a long-term view on an investment should smooth this volatility. Combining this with diversification further reduces the uncertainty". So investing over a longer time frame and starting early not only helps reduce the risks within investing, but also ensures returns that will be ahead of inflation and helps to secure your future financial freedom.

When you are young the temptation is to spend your money, you don't have much but every little bit helps and something saved today will benefit you down the road. Investing and saving are activities that you'll be doing for your entire lifetime and starting early certainly gives you a head start. Minnie comments that, "while you are working fulltime, saving and investing is a way to build wealth for your retirement years but also puts you in a position to purchase large assets, for example saving for a deposit to buy a house or car. Careful consideration needs to go into the types of investments that will help you achieve these goals. Later in life when you are not earning an income by means of a salary you have to manage your investments in such a way that it provides you with an income for life.”

In other words while retirement may seem a million years away and your small amount of money is barely enough for day-to-day life, the earlier you start the better and more secure you're likely to be when you do eventually reach retirement age. The time when you can hardly think beyond the next exam or party - this is when it is critical to start your savings and investing culture. Sure, by starting early you'll be making some sacrifices now and may feel a little out of pocket, but in the years to come those small sacrifices will make a significant difference.

The simple approach is to put aside a little of whatever you earn, regardless of how much it is. If you set aside something every time you earn you'll start on that journey to a successful and enjoyable retirement or even just ease the path to buying your first car or home.

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