Investment is a way to ensure you have an adequate income in the future. Even if investment means, as a child, putting away a quarter a week in a piggy bank, it is an important habit that will pay off in the future if you have unanticipated needs. While investment benefits everyone, it offers slightly different benefits at different ages:
- College students: Imagine that you simply put $25 a month into a savings account at 5 percent interest. By the time you retire, at 65, that would become over $50,000 dollars due to the nature of compound interest. Other good reasons to invest include building up a down payment for your first house and being ready to pay off college loans.
- Couples with young children: The first major investment couples with children should make is a tax-protected college savings account for their children. Next, the earlier people start saving for retirement, the better off they will be when they retire and the earlier they will be able to retire. Finally, investments protect them against emergencies such as medical expenses or being laid off from their jobs.
- People in their 50s are in their peak earning years, making it an ideal time to build up investments. At this point, they also may have low living expenses, probably having put their children through college and paid off their mortgages, making them able to afford a higher rate of savings. Finally, they are in the last one or two decades of creating the portfolio that will fund their retirement.