Creating long-term financial success starts early. This is why it’s so critical for students to start thinking about finance in a responsible and meaningful way as soon as possible. Those who wait to begin prioritizing their financial future and cash flow needs until they’ve landed that dream job or until after they’ve graduated from college are putting themselves behind the eight ball. When it comes to money and fiscal strategy, one of the key factors that lead to success is time. The power of time can’t be overstated, and yet far too many young adults simply fail to grasp this key concept of fiscal responsibility.
Time equals money.
In the world of investing, the more time you have to save, the more doubling opportunities your money will experience. This is just simple math as the power of compound interest continues to add up over the lifetime of your investments. Beginning a portfolio in your 20s gives you the potential for around seven doubling events before you hit retirement age. In contrast, beginning this financial journey at the end of this decade or in your early 30s provides only six opportunities, on average. Simply starting a few years earlier carries the potential for double the cash value of your retirement portfolio when you arrive at the point of withdrawal from these long-term accounts.
What’s even more exciting is that these growth opportunities will happen whether you act as an active investment manager or not. Simply placing your cash into Exchange Traded Funds (ETFs) will give you the growth factor that you’re looking for in a retirement or long-term stock savings account.
College financial planning should of course start with the necessary expenses that come with the schooling you are chasing after. Saving for college and augmenting your cash flow with loans, grants, scholarships, and other sources of funding is crucial, but as you enter into this weird and wonderful world of adulthood, it’s essential to remember that saving for your future simply can’t be put on hold. By forgoing the investment component of strong financial health, you are putting your future at risk.
Saving provides greater borrowing opportunities as well.
Not only is saving important for your future retirement goals and purchasing needs down the line, maintaining great savings and cash management habits will provide you with the credit score that you need to borrow for a new car, home, or even boat in the future. Borrowing is a part of life these days, and lenders have existed in some form or another for as long as humans have traded goods and services for a commodity item of value (i.e., a Dollar). Yet borrowing is a highly nuanced practice these days. Lenders want to see a history of on-time monthly payments, qualification through the use of a credit score and corresponding credit history, and even the promise of a down payment of substance on any new purchase.
Utilizing an auto loan calculator will help you understand the down payment and monthly payment burdens that you are likely to encounter with any new buying opportunity. With this knowledge in your pocket, saving for that next car purchase can be done quickly and efficiently. Likewise, a loan calculator can help you identify ways in which making strategic repayments can positively affect your credit score for a better interest rate and loan term offer from the lender you are applying with.
Financial health and knowledge is so crucial in today’s world. There is a huge amount of information out there but common sense investing, saving, and borrowing practices will always reign supreme.