Starting to save and invest in your early twenties pays off!

Starting to save and invest in your early twenties pays off!


If you’re 22 or younger (that is, if you were born between 1996 and 2014), you and your friends are known to marketers as Gen Z. You may feel like you have little power financial. Be aware, however, that in 2020 your generation is expected to be the largest demographic group in the world, which means your financial power will only increase.

A generation that shares the values ​​of past generations

According to those who do this kind of research, Generation Z has values ​​similar to those of older generations. For what? Because you attach great importance to family and interpersonal relationships. You are ready to work hard. You are responsible, determined, reliable and autonomous. In this sense, you are made of the same stuff as your great-grandparents or great-great-grandparents, who experienced the Great Depression.

You also view finances the same way they do. You don’t take risks with your money, you run away from debt and you like to save. It is wise. This means that, when you start working, you can choose the job that really interests you, even if it pays a little less than others, because you will have little debt to repay.

Already saving for retirement?

This is another amazing characteristic of Generation Z. Even though retirement may seem like a world away, 12% of you have already put money aside for this purpose while 35% are planning to start saving. in your twenties .

Let’s grow your savings

The best part about starting to save in your 20s, rather than in your 30s or 40s, is that the money has time to grow for a much longer time before you need it for retirement. It’s called capitalization. Thanks to it, the value of an investment can increase, in most cases, well beyond the initial amount invested. Here’s how it works.

Compound interest (like when you put your money in a savings account or in a guaranteed investment certificate with a fixed interest rate) allows you to earn interest not only on the money originally invested and the money added later, but also on any interest generated by these amounts over time. Accumulating interest on interest over a long period results in compound growth of the investment.

To give you an example, imagine a forest. This can grow from trees planted by hand (like periodic dues), but also from those that sprout on their own from seeds that have fallen from trees already planted (like compound growth on dues). So, if given time, a few trees will eventually grow into an entire forest without much effort.

The capitalization of mutual funds to accelerate the growth of savings

When you invest money in equity or balanced funds, it is not the interest that makes the investment grow, but the return on the investment that comes from the growth of the companies in which the money is invested. In general, especially over a long period, mutual funds grow faster than investments with fixed interest rates because the potential return on the capital invested is greater. What’s more, with compounding you can get returns on returns, so the savings potential is far greater than with fixed interest rate investments.

Let’s be clear: investing in mutual funds is not without risk. Unit values ​​and performance will vary over time. However, a long-term investment strategy can reduce risk because the time when you will need your retirement savings is still a long way off and by then your investments will have had time to regain their value if the market had to flex.

By working with an investment representative, you’ll be able to choose a mutual fund that matches your risk tolerance, so you’ll be comfortable with your decision.

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