Most people think investing is for rich people who can afford it. At least that’s what I thought when I was at school. Although, if I’m honest with myself I was actually facing two barriers but only acknowledged one to myself - that I couldn’t afford to invest because I didn’t have any money. The second barrier, that I wasn’t willing to admit, is that I didn’t know how to invest.
I finally got round to understanding how to invest in my mid-30s (better late than never) and built and launched franc.app to help other people overcome the same challenge that I faced by making investing easy. No minimums. No complicated choices. And everything managed through an easy-to-use mobile app.
That said, the first challenge remains perhaps the most important barrier, because if you think you don’t have any money to invest, you won’t even begin to ask yourself the second question of how to invest.
That’s why in this post I want to discuss the importance of investing and why it’s so important to start when you’re young. I want to encourage you to start investing, even if it’s only a small amount of money.
Investing small amounts of money regularly is often called “micro-investing” but I don’t like that term, because money is money and using your hard earned money to invest is distinctly different from spending that money, it doesn’t matter if it’s R10, R100 or R10,000.
So why is investing so important, even if you’re only investing R50 per month?Well, it’s important for three simple reasons:
1. Unlock compound growth
The first reason is also the most obvious one - by investing you start putting your money to work, by enabling real growth of your money. People often confuse saving and investing. In my mind they are very different. Saving means you’re not spending but sadly most people save in a bank account that typically offers 0-1% interest. This means that most people are in fact losing the value of their money when they save because of South Africa’s 3% inflation. Investing means your money has real growth opportunity and therefore unlocking the potential of compound growth. However, in order to maximise your growth potential it’s important to start investing as early as possible (to understand why it’s so important to start as soon as possible read Rice, rice baby).
2. Make a habit of investing
The second reason is more subtle and has to do with setting up the habit of investing. More importantly, making a habit of paying yourself first. The best way to do this is to set up a regular stop order such that when you first get paid your salary, one of the first things you do is contribute to your investment account. Once you have established a habit, you’ll be surprised how easy it is to manage your ongoing monthly expenses. And the best part, you don’t need to wait until the end of the month to see if you have money left over to invest, instead any extra cash you have at the end of the month you can use to top-up your investment.
3. It’ll change the way you think about money
The last reason is arguably the most important because once you see the power of investing and experience first-hand how your money can work for you, instead of you working for money, it will change the way you think about and manage your money. I had this change of mindset when I started investing and it radically changed my life - I started investing more which allowed me to expand my future plans and dreams. It’s a positive feedback loop that will change your life.
So to conclude, no matter where you are in your life, you can and should start investing today (or invest more, if you’re investing already). And hopefully you’ll agree with me that it doesn’t matter how much you invest, the important thing is TO invest.