Personal investment is an aspect of finance that everyone should get involved with. Asides from the fact that it helps you build wealth, there are lots of benefits of personal investment and investing early.
Personal investment is the best financial decision you can make as soon as you start earning a paycheck either as a retirement savings plan or to raise business capital. You have to do more than earn money to become wealthy and investing does that for you. If you want to build wealth and healthy business life, investing is the step to take, thanks to the power of compounding- the ability to grow an investment by reinvesting the earnings.
Below are some of the benefits of personal investment. Read the other articles in the personal investment series here.
Personal Investment Will Help You Build Wealth
One of the easiest ways to build wealth is through investing. As discussed above, the power of compounding as mentioned by Albert Einstein helps your investment grow over time when you reinvest the earnings.
There are several ways of investing and growing your money and it has become easier all thanks to digital technology. However, before you invest, you need to create an investment plan that suits your income and your investment goals. Some of the common investment plans include:
- Stocks and bonds
- Physical commodities
- Savings accounts
Secure Your Retirement Future
In this case, the principle of investing early comes to play. To secure your retirement life, you need to stop earning money alone but start investing part of your income. The more you invest the more you will be able to enjoy the dividends of compound interest.
Forbes describes compound interest as the interest you earn on a balance in a savings or investment account is reinvested, earning you more interest. It accelerates the growth of your savings and investments over time.
Here is a detailed illustration;
- Let’s say you have N100,000 in a savings account that earns 5% in annual interest.
- In year one, you would earn N5,000, giving you a new balance of N105,000.
- In year two, you would earn 5% on the larger balance of N105,000, which is N5,250, giving you a balance of N110,250 at the end of year two.
The best part of this type of investment account is that the growth of your account balance would accelerate over time as you continue to earn more interest on larger balances.
Invest To Meet Other Financial Goals
If you need to meet other financial goals, then personal investing is the right option for you. For instance, investing in a child’s education or capital for a business you plan to start. This is only applicable when you have a long-term goal of ten years or more, this way you can reach the financial goal quickly and easier.
There are many benefits of personal investing. If you plan to create a secure financial life for yourself, secure your retirement life and future and also build your wealth, then you need to start a personal investment plan today.