OK, it probably seems like a stretch, but the person playing Pokemon Go isn’t entirely unlike the person who neglects to begin investing. As we all know, the earlier you start, the better, to take advantage of the magic of compounding. History has shown: The earlier you begin, the less you actually have to invest to achieve returns equal to or higher than a person who began later.
This picture taken on July 26, 2016 near the Louvre museum’s pyramide in Paris shows the ‘Pokemon Go’ app on the screen of a smartphone. (THOMAS SAMSON/AFP/Getty Images)
Bear with me. I’ll explain!
Pokemon Go often leads to a lack of attention to your surroundings. By waiting until some random, undetermined future date to begin investing, you are, essentially, not paying attention to your future financial situation.
With Pokemon Go you’re wandering around aimlessly, staring at your phone and chasing cartoon monsters that aren’t really there. By waiting to invest, your money is wandering around aimlessly, chasing real goals (vacation, a house, retirement) it can’t achieve.
With Pokemon Go, you’re at risk of looking stupid, running into someone on the street, or even falling off a cliff. By waiting to invest, you’re risking a different kind of accident. What’s different is the risks might be not be evident until later in life. And they aren’t the kind of accidents that you read about in your news feed. The headline might read “Woman, 55, unable to take beach vacation with grown children due to lack of savings”. Or ”Man, 65, postpones retirement due to lack of funds”. It might not be as dramatic as plummeting off a precipice, but it’s still pretty scary.
To illustrate the benefits of saving early, let’s take a look at an example. Say you begin investing at age 25, and invest every year until you’re 60. How much of an advantage would you have over someone who waited until she was 35, and invested until she was 70?
Well, at age 70, you would each have invested the same amount, $68,500. But, you would have almost $600,000, while your friend who was late to the party would only have $280,000!
*Assuming 7% annual return
What if you started at the same age, but stopped at 35, while your friend began at 35 and continued investing until she was 70. Because you started so early, you would still have more!
*Assuming 7% annual return
Even with almost 25 years and $48,000 less, you would still have more money than your friend who invested for the first time at 35.
Imagine if you bought a phone with that same logic.
You: “So this one (gesture to the brick phone) is more money?”
Teenage salesperson: (a little dazed, didn’t realize phones like this existed) “Yeee….es.”
You: “Three times more money?”
Teenage salesperson: “Yes.”
You: “And it’s not nearly as good?”
Teenage salesperson: “Yep!”
You: “Great! I’ll take it!”
End scene. You leave, broke, with a phone that weighs more than you do.
Unless you have an unfulfilled dream to be Zack Morris (hey, I don’t judge), this is not a great scenario.
Besides the huge benefits of, you know, being able to retire someday, investing early has the added advantage of letting you gloat to your friends.
“Oh me? (casually sipping a glass of Malbec) Yeah, I started investing a few years ago. Just a little bit at first, then more as I moved up the ladder at work. It feels great to have a plan in place. But enough about me. How about you? Did you finally catch that Lapras?”
This article was written by Kate Stalter from Forbes and was legally licensed through the NewsCred publisher network.
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