I’m hoping you opened this book because you have at least a vague interest in investing, but like so many investors before you, including myself, you just have absolutely no clue how to start.

Here’s your first step. Quiet the inner voice that’s telling you some version of these excuses:

“You’re too young to worry about investing. That’s a grown-up thing. Like married with a house and a yard and a dog and a kid kinda grown-up.”

“You’re not smart enough to figure this out.”

“You’re too broke to be able to invest in the first place.”

You are grown up enough. You are smart enough. And we’ll get to whether it’s the right financial move for you to start investing now.

The fastest way to silence that inner critic is to clap back with why you need to be investing.

WHY YOU NEED TO INVEST YOUR MONEY

The simplest reason is this: it’s an efficient way to build wealth.
Seasoned investors, personal finance writers, financial advisors, and pretty much anyone doling out money advice will wax poetic on the ad­vantages of starting young and being consistent as an investor. The rea­son for this isn’t wishful thinking about what could’ve been if they’d only started sooner or been a little more aggressive with their contributions to the stock market. It’s simple math.

Reason 1: Compound Interest

“Compound interest is the eighth wonder of the world. He who under­stands it, earns it. He who doesn’t, pays it,” Albert Einstein, allegedly, once remarked.

Regardless of which wise man (or woman) made the statement, truer words were never spoken. Compound interest and the principle of com­pounding are essential reasons why investing early and consistently are touted as the means of wealth creation.

In short, compound interest is earning interest on interest. In ex­tremely simple terms, it works something like this:

On January 1, 2019, you invest $1,000 in an index fund. (We’ll get to what that is shortly.) By December 31, 2019, you’ve earned an 8 percent rate of return, so a total of $1,080 is now in your account. Starting in 2020, you begin earning interest on the $1,080 in your account, not just on the initial $1,000 investment. In 2020, you earn a 6 percent return on your $1,080, so you now have $1,144.80 in your index fund. Year after year, your money compounds, and you earn interest on your interest.

An increase of $144.80 in two years might sound like chump change, but imagine how quickly you can take advantage of compounding if you’re contributing to your investments monthly or even annually? In the scenario just described, you didn’t put in another penny after the ini­tial $1,000 investment and you still earned $144.80 in two years.
 
Or try this example:

Instead of starting with $1,000, you begin investing $100 per month in an index fund. Over the course of twenty years, with the fund receiving an average 7 percent return, you will have earned $49,194.59. It only would’ve amounted to about $24,000 if you’d put the same $100 in a basic savings account each month instead of investing it.

Investing allows you to take advantage of compound interest in a way that socking your money away in a savings account doesn’t.

Reason 2: Inflation

“The idea is, you will not outperform inflation without investing,” says Carrie Schwab-Pomerantz, president of the Charles Schwab Foundation, and senior vice president at...