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What are the Benefits of Investing Early?

What are the Benefits of Investing Early?

In the previous blog post, we had spoken about the ways and means to make our child(ren) Financially Independent at a ripe age by taking advantage of the oodles of time that they have in their hands. It would be ideal to follow this approach with the benefits of early investing and the Lessons that it teaches our child(ren).

Let’s get straight on to business here.

Habit of Saving

‘Do not save what is left after spending, but spend what is left after saving’ – Warren Buffet

We are slowly but surely becoming a consumerist society where the focus is on consuming rather than saving.

While it does drive economic growth, it also leads to higher debt at an Individual level.

Parents play a pivotal role in instilling the value of saving and budgeting in children.

These when imbibed at a very young age leads to good economic sense in children.

All these can be taught in a phased manner.

The habit of saving can be followed by budgeting and then spending.

In today’s age where things are moving swiftly towards digital mode, Parents have their plates full in imbibing money matters in their young ones.

Having said that, the gains are immeasurable.

Develop Discipline in Investing Early

‘Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time. You can’t produce a baby in one month by getting nine women pregnant’ – Warren Buffet

Over time, what I plan to do is to show my daughter how her Investments are faring and the way itis compounding over time. This shall be done at intervals of 5 years, 10 years, 15 years, 18 years and 20 years.

The sole intent is to showcase the value of discipline and patience required in investing and the magic of compounding.

That, in turn, would surely instill discipline in her in relation to money matters and in other areas of life.

Investing Early Can Fetch Big Returns

‘When you invest, you are buying a day that you don’t have to work.’ – Aya Laraya

One cannot stress more on the Power that Compounding possesses.

If one invests a Lac into Nifty Equity Index fund on behalf of our children at birth, the corpus can easily multiply 16 times at an annualized return of 15% when the child turns 20. Refer previous blog post to further explanation on this.

And (s)he is still a few years away from starting a working life.

Can there be a bigger super power than this?

Compare this with millions and if I may say billions who don’t adopt this approach.

Adopting it would give the child a head start in his/her career and life in general.

One cannot imagine the confidence that s(he) would have while approaching the life ahead and this could easily place his/her head and shoulders above the rest.

There Can Hardly Be a Loss in Invested Corpus

‘Big money is not in the buying and the selling….but in the waiting’ – Charlie Munger

The longer one stays invested, less likely would be his/her chances of losing money. Period.

When we talk of long term investing there can NEVER be a loss. On the flip-side, the gains are unfathomable.

If the time horizon is greater than 7 years, one is set for financial windfall.

There is hardly any need to time the market if the time in market is for so long.

Just invest and rest.

What better way to teach our child(ren) the value of patience.

Improves Risk Appetite

In simple terms, Risk Appetite is the ability of an Individual to take risks in order to churn out higher returns.

With so much money already in its kitty, the child is already sitting pretty and presumably this would give one more leeway in taking risks at a young age.

Furthermore, with so much time in hand as well, it allows an individual to take that extra amount of risk to garner extra return.

Safe and Secured Future

‘Money is not everything. Make sure you earn a lot before you speak such nonsense.’ – Warren Buffet

Having money at a very young age makes smooth sailing.

Money solves most problems in Life. And if one has enough at a young age it takes care of most desires.

One would never need to worry about any urgent need to cash and things alike.

Can there be a better way of enhancing the quality of life and imbibe better spending habits?

Would believe even retirement can be taken care of with a sound financial stronghold.

Long Story Short

Saying we can’t afford to invest in early child development means we’re storing up bigger costs in the future – Michael Marmot

Parents can act as a great support to their child(ren). Instilling wise spending, budgeting habits can go a long way in helping a child be prepared for the future ahead.

On one side, the child is monetarily well placed and on the other (s)he is wise when it comes to money matters.

Explore More: How To Make A Child Financially Independent

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