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Reasons why the youth should consider saving in capital markets



The part of financial system focused on raising capital by dealing in bonds, shares and other long-term investments is called capital market as the buyers and sellers engage in this market to trade financial securities. This market plays a critical role in mobilizing funds and channels them into productive investments for the development of industry and commerce thus saving and investing in capital market is very important as it is vital for the growth of an economy. Investing and saving in capital market at an early age is very benefiting for the youth as well as for the economy as assessed in the paragraphs below.

 

It is worth to state from the outset that by investing and saving at an early stage of life, you learn a pattern of financial independence and discipline. An early investment teaches the real difference between investments and saving. Never think young age is a barrier to making an investment, as you are never too young to invest. The Little amount of money invested now will put more money in your pocket in the future. You can seek an expert’s view to select the right avenues to make an investment[1].

 

One cannot fail to note that saving and investing at an early age leads to compounding returns, for the time value of money increases over a period of time. Regular investments made right from an early age can reap huge benefits at the time of retirement. Moreover, early investment facilitates your entry in the world of finance early. Your money grows with time. Because of early investments, you can afford things which others might not, at that age. This puts you ahead of others who prefer investing at a later stage of life[2].

 

In addition to that, this practice increases the probability of reaching financial stability at a young age. Saving for retirement from the age of 20s rather than the age of 40s is always a better idea. Life after retirement is more challenging than it has ever been, so planning for retirement now will lead to happier life after retirement[3].

 

More to that, saving and investing in capital market at young age is very beneficial to the youth, as the issuing of stocks, mutual funds and bonds earns more in less time of maturity than normal deposits in banks. At the time of maturity youth that have invested and saved in capital market, they can sell their securities and gain capital they can use in other ventures when they have gained enough capital.

 

It should also be emphasized that studies shows that investors tend to have better spending habits over their lifetime by not overspending; it helps them build their wealth over the decades. This regular investing and saving habit builds discipline because making investment and saving payments requires that one must budget it. The resulting outcome is that it helps them plan for their future by setting priorities through setting goals, reminding them that short-term gratification items aren’t worth the long-term consequences[4].

 

As far as the economy at large is concerned, the early age saving and investment by the youth in capital markets will provide both new and existing businesses with access to cash or capital. Businesses use this capital to cover day-to-day operating costs and to finance expansions. The advantages of capital markets include job creation, economic growth and technological innovation[5].

 

However, investing in capital market four the youth at an early age might lead them to incur losses from their investment but it this is not that risky as to when they invest at an advanced age because when the investment is done at an early age there is more recovery time, as if you invest early and incur a loss, you have more time to make up for the loss on investment. Whereas, an investor who starts investing at a later stage in life, will get less time to recover his losses. Thus with early investments, your investment gets more time to grow in value[6].

 

In a nutshell, saving and investing in capital market at an early age is a very benefiting opportunity for the youth as they can compound their returns, contribute to their welfare as well as to the economy as whole, by gaining financial independence at an early age fostering their financial discipline. Therefore, it’s imperative to encourage the youth to start saving and investing in capital markets at an early age.

 

References

[1] https://www.axisbank.com/progress-with-us/invest/top-reasons-to-start-investing-at-an-early-age# 

[2] ibid

[3] ibid

[4] https://teensmeanbusiness.com/10-reasons-invest-youre-young/

 

[5] https://www.smartcapitalmind.com/what-are-the-advantages-of-capital-markets.htm#

[6] https://www.axisbank.com/progress-with-us/invest/top-reasons-to-start-investing-at-an-early-age#    

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