Well, that’s right and wrong. It’s true that people aged 50-plus control 70 per cent of the UK’s wealth and are more likely to own their home outright. So, of course, that gives them the extra disposable income to invest and save.
But in your 20s you’ve got one priceless weapon that the older generations don’t, which is vital for growing your investments – time.
Start property investing young
Investing isn’t a get-rich-quick scheme, so if you play your cards right over next forty or fifty years you could see small investment amounts pay big rewards.
In technical jargon, the main factor that works in your favour is compound interest. Compound interest means your interest gets added onto your original investment every year, so you end up getting interest on your interest too.
For example, if you put in £1,000 at the start of your investment and get 7 per cent returns a year, in year one you’ve got yourself £1,070. But then in year two you get 7 per cent of £1,070. By year five, you’ve racked up £1,418.
“The earlier you start investing in your 20s, the longer your money has to grow.”
This doesn’t just apply for investments but for your finances across the board, from ISAs to pensions. When it comes to pension saving, for example, the younger you are the longer you’ve got to build up your pot. In fact, the rule of thumb is to save half your age as a percentage of your income. So, if you start saving at 20 you should put away 10 per cent of your salary until you retire, but if you wait until you’re 40 you’ll need to save 20 per cent.
You’re probably thinking that you don’t have enough money for all your rent, holidays and partying – let alone investing. So how can you get into the right money habits now?
Three ways to get into the investing habit – on any budget
It’s a myth and common misconception that you need a load of money to start investing. Here’s what I’d recommend.
- Invest by Direct Debit
Why not take a ‘little and often’ approach to investing? Some property crowdfunding companies allow you to invest by direct debit every month, meaning the investing is automated and done for you. Could you spare £20 a month? You might not even notice it leaving your account.
- Micro-invest your impulse purchases
Your small impulse purchases can all add up, so the next time you’re heading for a coffee or a takeaway, why not micro-invest that money instead? It’s an increasingly popular way for millennials to save money through apps like Chip and it works for investing too.
- Reinvest your returns
Once you’ve started investing your money, try to reinvest your returns. This is how you get compound interest and one of the best ways to accumulate more money.
If you think property investing might be something for you, don’t hesitate. The best long-term returns and profits will come if you start investing in your 20s.
Property Investing & Equity Release
What Is Equity Release?
Equity release is the use of financial arrangements that provide the owner of a house, or other property, with funds derived from the value of the property while enabling them to continue using it.
How Does Equity Release Work?
Equity release is aimed at homeowners aged 55 and over. It allows you to take some of the value of your home as cash.
Property Investing in age 20’s to Equity Release
Equity release plans are available to homeowners from age 55, and there is no upper age limit. Not all providers lend at all ages, but most plans are available to applicants aged 60 to 85.