Is age just a number on wealth creation?

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It is a fact that majority of people will find themselves broke after retirement. Some parents will die leaving their kids behind with nothing. Is age just a number on wealth creation? This question is very important to consider if you are serious about making money.

Before and after age 30

Before age 30, you are likely to be in the following situation:

• single
• no kids
• no or little responsibilities
• more dreams or visions
• less experience

After age 30, there is a higher chance that you will have the reverse of everything in the list above. Maybe you will be sending your kids to school or probably paying for the mistakes you did before 30. The truth is that after 30, you will have to take more responsibilities for whatever you do – the food you eat, the clothes you wear or the money you spend.

Basically, life has three main stages:

1. Learning stage
2. Momentum stage
3. Stability stage

These stages differs between people but they depend on each other. If you fail to lay a solid foundation in the learning stage, your momentum is heavily affected and your stability level will be lower.

For you to make a million at age 60, the process starts at age 20. The only problem is that people only see it when you have it but they do not know about the long struggle you faced prior to that.

You do not become a millionaire when you have a million in your account. You become a millionaire when you lay a foundation during your humble stages.

Let us discuss: Is age just a number in wealth creation?

1. When you are young, you have more time to try and fail on a business and still manage to make it. There is more time to explore new things and to learn from a failure.
2. A young person can invest in risk assets expecting high returns. Risk assets are more rewarding in the long term than low risk assets. A 20 year old can make more money for retirement by investing in shares but a 60 year old may not afford to take that risk because if it happens that a catastrophe like Coronavirus hits the financial markets at a later stage, he/she may not have enough money for retirement.
3. The compound nature of interest rates favors a young investor.
   • Suppose that both a 20 year old and 40 year old save R 500 monthly at 5% interest rate.
   • At age 65 (retirement age), a person who is 20 years old now will have R 1 013 219 while a person who is 40 years old now will have R 297 755.
   • This is simply because a young person has more time to save money and gain more interest than the older person.
4. The chances of death by natural causes are lower for a younger person than an older person. Therefore, life insurance premiums are cheaper for a younger person than an older person.
5. A young person can easily adapt to new changes like technological changes but an older person will find this very challenging. A business that does not employ young people is guaranteed to fail.

Take home points

When it comes to wealth creation, age is not a number. Note, I am not saying you will not make money at an older age, what I am saying is that it will be a bit harder. I am aware that Warren Buffet made a fortune after age 50 but he started the investment journey at a very young age.

Even though I strongly believe that it is never too late for anything, the amount of effort needed when you start late is more. Therefore, it may be wise to ensure that you do the following now:

• Start investing at a young age or if it is a bit late, start investing for your kids.
• Get a life insurance when you are still young to take advantage of cheaper premiums.
• Start investing for your children when they are still toddlers.
• Start a business at a young age so that you will have enough room to learn.
• Learn a skill when you still have the time.

In conclusion, time is the greatest asset you have as a young person when you are investing. A small effort consistently applied for a longer time period has a large impact. Age determines the level of risk you are supposed to take and the type of assets you need to invest in. Therefore, age is not just a number on wealth creation. The earlier you start, the better.