Back to Blog
Is 11 too young? Shouldn't he be out there playing with his friends, biking around the close and eating sugary sweets? How young is too young to invest?
Am I too young to start investing?
If you are reading this and you are super young then, kudos to you for showing an interest in investing at a young age. It's a smart move, and it's never too early to start thinking about your financial future.
If you are reading this and you aren’t “young” then this is the article to share with your niece, nephew, godson or other young person. As an aside Alan still thinks anyone under the age of 40 is still young! Isn't it interesting how your perspective of young shifts over the years?!
A lot of people think that investing early often comes at the expense of living your life, and having fun whilst you are young. What if it wasn’t binary and you could save for retirement and still have fun along the way?
In this article, we'll explore both sides of the coin, the benefits of investing at a young age and the merits of spending your hard-earned cash to live your best life today.
The Pros of Investing at a Young Age
When it comes to investing, the earlier you start, the better. Here are 3 reasons why investing at a young age can be advantageous:
Time is on your side: One of the greatest advantages of starting early is the power of compounding. By investing early, you give your money more time to grow, thanks to the magic of compound interest. Even small contributions can snowball into substantial sums over time, setting you up for financial success in the long run.
Let's take the most extreme example of the power of compounding let’s look at investing for a new born baby. Katie and Alan call this method of investing BabyFI.
If you put £10k in an investment account, bought a broad based index fund, at birth for a new-born, how much do you think they would be worth at normal retirement age?
Yes you read that right. They would be worth over £6M at normal retirement age. isn't that crazy??
The power of compounding is incredible and the earlier you start the more time it has to work for you. If you are reading this and you are over the age of 30, that doesn’t mean you shouldn’t bother. It will still work for you too!
Learning opportunity: Investing at a young age provides an excellent chance to learn valuable financial skills and gain real-world experience. By getting involved in the stock market, learning about property or playing monopoly, you can develop a solid understanding of how the financial world works and hone your decision-making abilities. The world speaks the language of finance and this is a second language you must learn.
If you are reading this and you uncle sent it to you as a 25 year old, you are still young. You have a huge opportunity to learn now and set yourself up for later in life.
Financial Independence is possible early: If you are reading this and you are 20 then there is a chance that you could achieve financial independence by 30 and never have to work again if you don't want to! How many people have we heard that find this content in their 30s, 40s, 50s or 60s and all lament "I wish I had found it sooner.
Don't let that happen to the important people in your life! Get this article in their hands! Set up a watch party and watch Rebel Finance School. Help them to see the world in a different way to the one we were all trained in!
Read more: The Donegans’ guide to starting with investing
The benefits of spending more when you are young
While investing is undoubtedly important for building wealth, it's equally vital to enjoy the present. You don't want to miss out on amazing experiences when you are younger, sacrificing the present for the promise of more in the future!
Here are a few reasons why you might spend money to live your best life today
Life experiences: Money spent on experiences can be incredibly rewarding and enriching. Experiences or stuff? Would you prefer an expensive watch or to see the grand canyon? What pays more dividends over time?
ravelling, exploring new hobbies, or pursuing your passions help define who you are, help you see a different world, and create memories that last a lifetime. Investing in experiences can contribute to personal growth and happiness.
There are some things that can only be done (or are much more fun to do) at certain times of your life. Backpacking around the world or going skydiving might be on your list of experiences you’d love to have - doing these in your younger years might be a very different experience from waiting till retirement!
I am 44 and I am not going skydiving any time soon!
One last thing to realise is that these experiences don't have to cost a fortune. You can stay in a gorgeous place on the beach in Danang, Vietnam for $11 a day and see a different side of the world. Experiences can cost a lot of money but they don't have to. Spend a little and maximise your joy.
Enhancing quality of life: Spending money on things that improve your daily life can have a positive impact on your overall well-being. Whether it's investing in your health or enjoying leisure activities, spending wisely can enhance your quality of life in the present moment.
Katie and I procrastinated about buying Fitbit watches for a long time. We thought they were too expensive and wanted to invest instead. Eventually we bought one each and started to use them. They had a huge positive impact on our life, we started walking more, we could understand our heart rate, sleep cycle and more. We put it off too long!
Don't sacrifice health or happiness for money!
While it’s important not to fall into the hedonic adaptation trap, a small amount of spending on something that makes a big difference to your everyday life can be worthwhile - especially if you’ve been living off a typical student diet for a while!
Career advancement: Putting some of your cash towards education, training, or building professional networks can pay off in the long run.
Investing in your skills and knowledge early on can open doors to better job opportunities and increase your earning potential, ultimately supporting your financial goals. Hold on a second is Alan really telling me that I should invest in formal education!?
No. Alan is suggesting that spending money on books, courses and education can be hugely rewarding. Self-development has had a massive impact on our lives and the money we have spent their on CD sets, courses and more changed our lives.
The best thing about being alive right now though is that so much of this amazing education is available for free. What to know how to start a business with no money, go on Rebel Business School. Want to know how to manage your finances, go on Rebel Finance School. Find a podcast that teaches you, buy a $10 book that could change your life.
One of my favourite expressions is “take a job for what you can learn, not what you can earn” The skills and knowledge you can acquire working for an incredible individual or company will be with you for life.
Are you too young to invest?
Absolutely not! Investing at a young age can set you up for life. It is n incredibly powerful thing to learn about and do at ANY age.
However, it's crucial to strike a balance between saving for the future and enjoying the present.
I remember seeing a BBC article a few years ago about how financial independence had ruined this young ladies life. She had got so hooked on the idea of saving and investing for the future that she said no to going to friends weddings so she could save the money instead.
This is CRAZY behaviour. Have fun along the journey. Spend a little money and do amazing things. Create amazing memories by doing experiences, going to cool places, travelling. It doesn't have to cost a lot!
"Die with Zero" by Bill Perkins: In this thought-provoking book, Perkins challenges traditional retirement planning and encourages readers to make the most of their lives and resources without postponing happiness. This does come with a HUGE warning. the Donegans are totally against the section where Bill talks about borrowing money when you are younger to do more as you will always earn more. This is irresponsible.
As with any book you read please evaluate the ideas in them and think for your self. Don't just trust the author. Discuss their ideas, the impact and more.
"Four Thousand Weeks" by Oliver Burkeman: Delve into the concept of making the most of your time on this planet and learn how to prioritise your goals, make meaningful choices, and navigate the demands of modern life. This one changed Katie's life and opened her mind to a new way of looking at things.
Rebel Finance School. If you have a young person in your life get them on the investing weeks of the Rebel Finance School. Start them learning about money and investing at an early age.