Why you need to start investing early!

When it comes to investing, time is the most important element. Actually, it is time plus consistency. Let me demonstrate using a case study of four hypothetical high school friends called Jane, Paul, Aggie, and Tom. They all went to Makerere University and graduated with a degree in Economics. They were all lucky to get reasonable jobs after campus.

For some strange reason, Jane opens up an investment account at age 25 and starts investing 100k per month. Paul only starts saving 100k per month at the age of 35. Aggie only wakes up when she is 40 years old and also starts saving 100k per month. Tom finally gets it at 50 years old. Fast forward 35 years later when our friends are 60 years old. They all open their investment accounts but are utterly shocked at the difference in amounts they each have. Jane has over 350m; Paul has about 130m; Aggie has only 76m; and poor Tom has only 19m to show for his efforts.

So what has just happened here? It is the miracle of compounding. What happened is that because Jane started earlier she got to compound her money faster than the rest of her friends. This is something I try to impress upon young people. Start investing early! However, only a few get it. Most are still excited about trendy phones, clothes, and cars. Your biggest asset as a young person is time. Use it productively and let compounding work for you.

Now, let’s look at a fifth character called Lillian, a typical planned kid. Lillian has foresighted parents who understand compounding. Lillian’s parents offer their beloved daughter a retirement gift. They seed ugx 10m into an investment account when Lillian graduates at 25 years. On top of this Lillian consistently invests 100k per month. At age 60, Lillian has a retirement fund of over ugx 670m. This is a very good strategy for parents who can afford it. Open an investment account for your children and seed it with some money regularly. When the child turns 16 years open an NSSF account and transfer the cash to NSSF. This is how you break generational poverty. The child can never touch this cash until they are 45 years of age and relatives can’t steal the child’s inheritance. This allows the miracle of compounding to work its magic. This is such a beautiful gift to leave to your children!