Note the following content is intended to be educational but it does contain promotional material for Kaldi.

Your 20s are for experiencing life—navigating new careers, cities and relationships. Saving for some far-off retirement or buying a home feels like something you’ll eventually get around to when the time is right. In other words, you’ll worry about that stuff later.

Well, not so fast. While savouring every moment of this point in your life is exactly what you should be doing, taking a small amount of that energy and channeling it towards investing now can massively pay off down the road.

The truth is, your future self will thank you for putting money away early, no matter how modest the amounts. You don’t need to go all Wolf of Wall Street either, and why should investing for milestones like retirement, homeownership or even buying a high-end car only be for the old folks?

Ready to get that money snowball rolling? Keep reading for ways to invest before you're 30.

But first … a little about what compound growth means for investing

Compounding is like a snowball rolling downhill, picking up more and more snow as it goes. Here's how it works in simple terms:

Let's say you invest £1,000 and it earns 5% interest per year. After the first year, your money grows to £1,050 (the original £1,000 plus £50 interest).

The next year, you don't just earn 5% interest on the original £1,000. You earn 5% on the total £1,050 you now have. So your £1,050 grows by another £52.50, taking you to £1,102

Then the following year, you earn 5% interest on that new total of £1,102.50. So, your money grows even further to £1,157.63. You get the picture.

But do you see what's happening? You're earning interest on top of your previous interest earnings. Just like the snowball it’s picking up more as it rolls down the hill, gathering speed and size the longer it rolls picking up more and more snow. Your money is literally making more money through compounding.

The earlier you start and the more frequently interest compounds, the faster your money snowballs. Over many years and decades, even small sums can grow into substantially larger amounts thanks to this snowball effect. And of course, there's always the option to invest a higher amount if you have the means to do so.

Such growth isn't guaranteed and depends on various factors, including market performance and tax rules (there might be a dip in the hill which knocks a bit off the snowball). But it provides an indication of how compound interest works.

The magic formula is making your money make money, then making that new money make more money. You start to build savings, and it all started from a modest beginning and the force of compounding over many years.

Why start investing before your 30s?

When you're in your 20s, retirement can feel light years away. You're just entering the workforce, possibly paying off student loans, and most importantly, enjoying yourself. How could putting money aside for investing in your future be a priority now?

The truth for young people is that investing before age 30—even in small amounts—can be one of the smartest financial decisions you'll ever make.

Let's take a look at why you might want to start investing little and often as early as you can.

‍Hindsight is a wonderful thing

What’s the one thing you have over those older rich stereotypes that come to mind when you think about investing? Time. Time is your secret weapon, and the sooner you start investing, the more time your money has to grow through compounding. Even investing a small lump sum amount yearly in your 20s has the potential to reap exponentially higher returns decades down the road versus starting in your 30s or later.

A Forbes article illustrates that a 25-year-old who invests $500 each month, assuming a 4% return, will have roughly $629,000 by the time they reach full retirement age of 67. In contrast, a 45-year-old starting with the same monthly investment will only have about $205,000 by the same age. Sure, the example is in U.S. dollars, but the same principle applies to pound sterling.

The earlier you can get even relatively small amounts into the market, the longer you enable compounding to work its magic. Those modest monthly investments can snowball into a massive growth curve given enough time and patience. By contrast, maximising that effect isn’t quite the same if you delay starting to invest until your 30s or beyond. That extra decade of youth gives you a leg up. Or to put it another way, it’s a lot harder to make up for the lost ground if you wait till you’re 30.

You can make more investment risks

With 30-plus years until you retire, you've got a ton of time for your money to grow. That means you can put it into higher-risk, higher-return investments like stocks and shares without stressing about every market dip or crash.

Think of it like this: say the stock market takes a tumble one year and your investments lose 20% of their value. That would definitely sting if you were just a few years from retirement. But when you're in your 20s? That short-term drop doesn't have to be such a big deal because you've got decades for that money to hopefully recover and keep growing.

So while your friends who start investing later might go for safer, more conservative options, you can let your money be a little riskier early on. And over many years, those higher-risk, higher-return investments could boost your earnings in a way that'll pay off massively down the road.

It helps create good financial habits

Skills like developing an appropriate risk tolerance, managing your money and sticking to consistent funding schedules are all things that you develop when investing early. These fundamental habits are reinforced through years of investing experience accumulated at a young age.

As your income and goals inevitably evolve over time, you'll approach new financial and investment decisions with a strong understanding and more confidence. Investing will just be something you do without it having to be a whole complicated thing.

Starting young means you get decades of practice getting into a persevering mindset while your friends, who spent their 20s spending all their money on £6.50 pints in paper cups and “dirty chips” from food trucks, are sharing a trending video about basic investing knowledge.

From automating monthly contributions to managing your ideal asset allocation, the sooner you begin investing, the quicker you create habits that will inform smarter money decisions for decades to come.

You'll be that much further ahead

Imagine two versions of your future self—one who got an early start investing in their 20s, and one who didn't. Which would you rather be in 40 years?

The "invest early" you could be more secure watching your early investments have the chance to grow through decades of compounding gains and time in the market, giving you less to worry about later in life.

Or the "start later" you? Probably still clocking in, stressing about catching up on retirement savings while your fun years pass by. Making the most of your prime decades gives you options your regretful self won't have.

By putting in just a little work upfront and early, your future self has a much better chance of living that rainmaker lifestyle you really want.

Ways to invest before you turn 30

Now that you're (hopefully) sold on the importance of investing early, what are some smart investment ideas to get saving in your 20s? Here are a few simple strategies to consider:

• Tax-Advantaged Accounts. One of the smartest ways to turbocharge your returns is by using an Individual Savings Account (ISA). Unlike regular savings accounts, any money you earn through interest or investment growth in an ISA is completely tax-free. (Just be aware that tax on investments is subject to personal circumstances and is subject to change in the future.)

Wait, what’s an ISA?

There are different types, but the one ideal for investing is called a Stocks and Shares ISA. This allows you to buy investments like funds or individual stocks and shares and avoid paying any tax on your profits when you eventually sell—more of your returns go straight into your pocket.

Open one of these tax-free accounts and contribute regularly, even if it's just small amounts at first. The tax savings combined with long-term growth can result in your money compounding significantly faster over decades compared to taxable investment accounts.

Okay, back to ways to invest

• Start with balanced funds. Investing doesn't have to be complicated straight out of the gates. A smart way to begin is with balanced investment funds that spread your money across lots of different areas, like stocks, bonds, and other assets.

• Automate contributions. Set up automatic transfers to consistently invest without effort or having to remember to do it.

• Embrace the long game. Being decades ahead could mean you can ride out market dips in pursuit of higher potential returns.

• Keep it simple. Invest through easy-to-use services, like Kaldi (more on us in a bit), and avoid overcomplicating it at this stage.

The name of the game is getting into investing through straightforward, low effort approaches today. Small steps in your 20s can pay off massively down the road.

Did someone say Kaldi? (Someone absolutely said Kaldi)

Think you need loads of money to start investing? Think again. With Kaldi you can start with just £1. Every little bit helps you grow your future wealth.

Kaldi lets you contribute small amounts towards your investments, so you can get stuck in and work towards your savings goals over time. More specifically, you can drip-feed cash into investments from cashback at over 170 top high street brands, directly into an index fund of your choice.

Take Sally. She’s able to use Kaldi to invest in a global index fund. In 2011 if she had invested £10K in a Cash ISA, today it will be worth less than £12K*. If Sally had invested in a higher risk index fund instead, such as Vanguard’s LifeStrategy® 100% Equity Fund, her money would be in a fund which has had historically earned an average of 9.6% return and would today be worth £34.8K*. That said, it’s important to be reflective of the fact that fees have an impact on total performance and historical data shouldn’t be used as an indication of future performance.

Or maybe it’s a new car you’re saving for. Less risky investments are best for shorter-term goals, such as saving for a shiny new motor. With the help of Kaldi, you can budget properly for your savings goals and gain access to numerous investment options, ideas and tools you need to accelerate your savings.

As a result, you can achieve your goal quicker than through traditional saving methods.

Are you ready to start investing?

Investing before your 30s can be a smart way for building wealth over time. And with the help of accessible investment platforms like Kaldi, you can start with small amounts, take advantage of compounding, diversify your investments and use tax-efficient accounts.

Whether you’re saving for a home, planning for retirement or are interested in responsible investing, there’s an investment strategy that will align with your life goals.

So, why wait? Begin your investment journey today and enjoy the fruits of your smart financial decisions in the future!

Have questions about investing? Don't hesitate to seek advice, as it's a great way to ensure you're on the right track.

Important Disclaimer (to keep our legal team happy)

Risk Warning: All investments involve risk, including the potential loss of the principal amount. Evaluate your financial circumstances and investment objectives, and consult independent financial advice if necessary.

*Source: Cash ISA calculation based on https://media.quilter.com/search/2023/savers-still-suffering-real-term-losses-as-average-cash-isa-rates-fail-to-limit-damage-of-inflation/. Based on investment in Vanguard’s LifeStrategy® 100% Equity Fund as a representative higher risk index fund. Total returns are listed on date of publishing this article and before Kaldi service fees. Illustrative fund total fees on Kaldi circa 0.37% per annum.

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