The Fool is a youthful company: our US parent recently celebrated its
tenth birthday and Fool UK came to life in September 1997, so we're a
scrawny six-year-old. What's more, as with many online businesses, the
Fool UK's workforce is young: most of us are in our twenties or thirties;
our greybeard is 47. At 35, I'm one of the older fools and also one of the
few with children.
I wish, I wish, I wish the Fool had existed when I went to University in
1986, as I may have avoided making so many financial mistakes in my adult
life. Despite being a mathematician, I've had countless money disasters
along the way: building up problem debts instead of budgeting properly,
borrowing on credit cards, missing out on pension payments, losing money
on high-risk investments and so on.
That's the first reason why I envy young people today: because they're all
Web-savvy and, therefore, have access to a wealth of information to help
them to become financially fit, such as these ten wonderful websites. The
second reason is more primitive: I envy young people their youth. Not
because their lives are fun and exciting, but because they have more years
ahead of them. In investment terms, the more years you have, the richer
you become. Here's what I mean:
Let's say I invest a big slice of my income - £1,000 a month - between now
and age 60, call it 25 years. Over this period, I invest a total of
£300,000 but, thanks to annual growth of 10%, I'm now a millionaire, with
a whopping £1,243,160 to my name.
(Note that the UK stock market returned an average of 12.5% a year over
the thirty years to 2002, but future returns are expected to be lower.)
Meet Fiona Foolfan, who is a clever 18-year-old willing to invest £200 a
month until her 60th birthday. Over 42 years, she invests a total of
£100,800 but, thanks to growth of 10% a year, she's considerably richer
than me, with a pot worth £1,359,204. Ta da!
So, to hammer home my point, here are those figures again:
I invest a whopping £1,000 each month; Fiona invests a more modest £200. I
invest for 25 years; Fiona invests for 42. In total, I invest nearly three
times as much as Fiona (me: £300,000; Fiona: £100,800). Fiona ends up with
£116,044 (almost a tenth) more than me.
How does Fiona do it? Simple: she invests for 17 years more than me, and
lets the miracle of compounding do the rest. So, if you want to be rich
some day, start investing today!
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