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Why you should start buying shares today

Financially-speaking, what are your expectations for the future?

I’m assuming you’re visiting this website because you’re reasonably optimistic and financially-literate by nature, and that you’re after great stock ideas, ideas hopefully that you can put real money behind to grow your wealth …  over time.

Stock ideas like Cochlear Limited (ASX: COH), a2 Milk Company Ltd (Australia) (ASX: A2M) or REA Group Limited (ASX: REA).

However, there are many people that won’t visit www.fool.com.au simply because they don’t know financial websites like this exist (yet).

Low(er) financial literacy for people under age 34 continues to be a problem and it’s therefore up to the financially-literate close to them to argue the case that degrees of financial independence are achievable regardless of one’s situation.

Here are some facts that people should know about:

  • Although half of Australians are confident or very confident that they’ll have a comfortable retirement, a significant minority (about 40%) are not confident, or concerned they won’t be able to achieve a comfortable standard of living in retirement *
  • Over a third of people say they ‘probably or ‘definitely’ will not have enough to retire *
  • The age and assets tests for the Age Pension are tightening so that if you were born on or after 1 July 1965, proposed legislation may mean you’ll not be eligible for the Age Pension until you’re age 70 from 1 July 2035 **, and
  • From 1 July next year, superannuation contributions limits are becoming less generous

* Australian National University ‘Ageing and Money’ poll October 2015

** www.humanservices.gov.au

Perhaps Australians overall have realised the extent of their own savings problem in that 71% of people aged 45 years and over are intending to retire at age 65 and 23% at age 70 *.

But if you’re under 35 today,  you have one huge advantage that older generations don’t have and that’s oodles of time.

It doesn’t matter if you’re a 25-year-old with $18,000 or less in super today. If you can compound this at between 8% to 10% per annum and receive, say, $335 in employer contributions every month (after contributions taxes) into a shares-focused superannuation account, this could grow to $612,000 at age 65.

Now imagine for one moment that a deliberate decision was made to not neglect ‘future you’ and 100 shares in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) were purchased at $15 today in addition to the regular employer contributions to super.

The additional purchase of around $1,500 in Soul Pattinson shares may mean an additional $54,000 to this person’s retirement fund at age 65 if the stock averages around 9.3% per annum. The stock, by the way has averaged 22.68% per annum since the beginning of 1990.

Tell me that won’t make a difference.

It will take a sacrifice to save though: don’t buy lunch every day and give up on the regular coffee.

The more you do this, the more your ‘future you’ will be very thankful.

But you need to make a start if you haven’t already done so.

Don’t be like a young work colleague of mine who turned up in the carpark the other day in a brand spanking new Audi. It kills me that she bought a luxury German vehicle over something more mundane.

I won’t go through the opportunity cost of such a purchase to her personal balance sheet, but you can read about the opportunity cost of buying a Nissan Patrol here.

Foolish takeaway

Regardless of your age, the simple matter is that you’ll be better off by saving more. Period.

Allocate your savings to a long-term investment plan, and without a doubt, you’ll be far more confident that you’ll have enough.

Don’t neglect your ‘future you’ and to get you started, here are three ‘new breed’ blue chips for you to consider buying today.

Discover the 'new breed' of blue chips that could take your portfolio higher

Forget BHP and Woolworths. These 3 "new breed" top blue chips to buy now pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

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Motley Fool contributor Edward Vesely has no position in any stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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