Ben Nash said starting investing early, regardless of the amount, is the key to building wealth. (Source: LinkedIn\/Getty) <\/p>\n
Most people think building wealth<\/a> is about how much you save or how smart you are with your investing<\/a>. But what makes the real difference isn\u2019t your income<\/a>, your investment knowledge, or even your budget \u2014 it\u2019s how early you start.<\/p>\n Consider an example of two people with the same goal of growing their money<\/a> through investing. One starts investing just a few dollars a day from the age of 20. The other waits until they get to age 40, when their financial position is more settled<\/a>, they\u2019re earning more, and they\u2019re able to invest a more \u2018meaningful\u2019 amount of $500 monthly.<\/p>\n But when we look at the numbers, you can see that by waiting, the damage is done. Even though the late starter is investing more than triple the amount of money<\/a>, they end up with less than half the amount of money at the end.<\/p>\n This is the power of time \u2014 it works silently in the background, and if you ignore it, the cost is huge \u2014 even if you\u2019re doing everything else right.<\/p>\n Going back to our example, we\u2019ve got two people, Emma and James.<\/p>\n Emma starts investing $5 daily from the age of 20, and James is our late starter who invests $500 monthly from the age of 40.<\/p>\n Because Emma starts early, her money has more time to grow \u2014 and that\u2019s where the magic of compounding comes in.<\/p>\n Do you have a story to tell? Contact yahoo.finance.au@yahooinc.com<\/p>\n Because even though she\u2019s investing less money overall, her money starts growing sooner. And through compounding, Emma benefits from growth on her growth, which cranks up her investment balance over time.<\/p>\n Based on the Australian long-term (30-year) average sharemarket return of 9.8 per cent, Emma\u2019s $5 daily investment would grow to be worth more than $1.48 million by the time she\u2019s 65.<\/p>\n For James, even though he\u2019s putting away $500 monthly, or more than triple what Emma is investing, he starts 20 years later.<\/p>\n By the time he reaches age 65, his money has grown to just under $650,000.<\/p>\n This is a solid result, but is $830,000 less \u2014 or less than half of the final amount Emma has from her much smaller investment.<\/p>\n For James to \u2018catch up\u2019 to Emma given his delayed start, he\u2019d need to invest around $1,250 monthly \u2014 or almost 10 times the daily investment amount Emma is putting in \u2014 all because he starts later.<\/p>\n It\u2019s not about earning more. It\u2019s not about investing huge amounts of money.<\/p>\n It\u2019s about giving your money time to work for you. When you start early, you don\u2019t need to be perfect. You don\u2019t need to pick some hot stock that takes off. You just need to get started.<\/p>\n Small amounts of money, invested regularly and consistently, are how regular people can build a life-changing amount of money.<\/p>\n It isn\u2019t \u2018sexy\u2019, and doesn\u2019t need to be \u2018risky\u2019 \u2014 but it is effective.<\/p>\n Waiting even a year to get started with investing can cost you a lot more than you think. Delaying by 12 months might not seem like much, but following our example above, waiting just one year to start your $5 daily investment (starting at age 21 vs 20), your final balance drops by $140,000.<\/p>\n But it gets worse. If you delay to age 25, that\u2019s over $580,000 you\u2019ll miss out on. And if you wait until age 30, you\u2019re giving up a whopping $940,000 in investment growth.<\/p>\n That\u2019s the opportunity cost of inaction \u2014 it\u2019s not just about not investing now, it\u2019s about future options you\u2019re missing. The earlier you start, the less effort it takes \u2014 and every year you wait, the cost of your inaction grows.<\/p>\n This is the hidden danger of inertia. Most people don\u2019t realise the real cost of waiting, because it doesn\u2019t really feel like you\u2019re losing money. But you are, because you\u2019re giving up future wealth that only time can create for you.<\/p>\n That\u2019s why time is your greatest asset. The longer you wait, the more effort it will take to catch up, and for most people that gap simply becomes too much \u2014 and they end up settling for an outcome well below where they really want to be.<\/p>\n And the best part of all of this is that investing $5 daily is something that\u2019s possible for almost anyone.<\/p>\n It doesn’t require a huge income, lots of time, or heaps of experience in investment markets.<\/p>\n Instead of stressing about trying to save hundreds or even thousands of dollars, simply automate a small daily investment and let it grow.<\/p>\n Thankfully today, technology is making this easier, with dozens of investment accounts that can help you easily automate a regular investment.<\/p>\n Follow this approach, and over time your investment growth will outpace how much money you\u2019re putting in \u2014 and eventually it will do more of the work than you ever could on your own.<\/p>\n Most people spend too much time trying to predict the perfect time to invest, or waiting for their financial situation to get more comfortable so investing is \u2018easier\u2019.<\/p>\n But the real winners are the people that crack on and get started, and focus on being consistent over a longer period of time.<\/p>\n Investing doesn\u2019t need to be some big, bold action you take once you have heaps of money. It just has to be consistent, and the sooner you start, the more you\u2019ll be rewarded.<\/p>\n Don\u2019t wait until you make more money, or saving is easier, or even until you\u2019re more of an investing expert.<\/p>\n You just need to make the decision \u2014 $5 a day today, or thousands monthly later trying to catch up.<\/p>\n Because when it comes to getting ahead, how soon you start is the single thing that will make the biggest difference.<\/p>\n Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth<\/a>. Ben\u2019s new book, Virgin Millionaire; the step-by-step guide to your first million and beyond is out now on Amazon<\/a> | Audiobook<\/a>.<\/p>\n If you want some help with your money and investing, you can book a call with Pivot Wealth here<\/a>.<\/p>\n Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.<\/p>\n Get the latest Yahoo Finance news – follow us on Facebook<\/a>, LinkedIn<\/a> and Instagram<\/a>.<\/p>\n Finance expert Ben Nash has explained how much people could be missing out on by not looking at investing their money. (Source: Getty) \u00b7 Andrzej Rostek via Getty Images <\/p>\n