The biggest mistake any investor – including someone in their 20’s – makes is not understanding the multiplying effect of compound interest. Time is the key component of growing wealth. Let’s look at some simple math: 270, 114, 48, 20, 40, and 3. At birth your multiplier is 270. If some invested $1,000 dollars and let it compound for 65 years earning a 9% return it would grow into $270,000.00. Wait until you are 20 and your multiplier drops to 48. The same $1,000 dollars grows to $48,000. Most Americans don’t get serious about investing money until age 40 and then the same $1,000 only grows into $8,000.
Age 20 is a critical crossroads where debt and instant gratification meet an uneducated consumer. The easy path is student loans and credit card debt. The road less traveled is to start an automatic investment plan when those around you swim in a sea of debt. Investing for a 20 year old has never been easier or cheaper. If you can subscribe for Netflix you can become financially independent.