The financial power of youth (2024)

As a 20-something making progress towards your financial goals can feel challenging. With paying off university debt to trying to get a foot on the property ladder it can feel like your opportunity for success with saving and investing is limited.Plus many millennials cite lack of personal finance knowledge for failing to start investing. Yet there is one powerful reason why it is important to not become complacent with saving in your 20s.

The power of youth.Millennials listen up, you have time on your side when it comes to investing - the most powerful tool. After all money is simply a medium for exchanging time so it makes sense that as you have more time to invest than someone in their 30s, 40s, 50s etc you have the potential in the long run to earn more.

This is all links to the power of compound interest. Compound interest is the idea that the interest you earn each year becomes part of the cumulative balance that is interest earning. Over time the balance will grow exponentially (at a greater rate the higher the interest rate is) , meaning that the more years you allow it to grow the greater the increase each and every year.

For longer-term investment goals such as retirement this is hugely beneficial as it means that you can invest less but gain the same returns. It is only through the power of compound interest that millennial can retire as millionaires from as little as £65 a month.

The danger of compound interest
However, this is what makes being in debt spiral out of control. As just as compound interest can be hugely beneficial to your savings and investment goals it is can see debt balances exponentially increase too. This is why you have to get intentional about paying off debt in order to make progress quickly as all to often you will spend years simply paying off the interest without even touching the principle.

What you can do right now.
Firstly, get yourself out of debt so that the negatives of compound interest don't eat up your money. If your unsure where to start read about the 5 steps to getting out of debt. So whilst your earning potential may not be as high in your 20s as it is in your later years. Investing now can allow you to save more money in the long run. The trick to making the most out of compound interest is to start investing NOW. Even if its just a little amount, investing young is so important. Don't let being a student let you put of starting to invest, try supplementing your income with these ideas and check out these investing options for students.

How are using time to your financial advantage?