Why it makes sense to invest

Earlier today I wrote an article about three shares I’d buy for my child. In that article I made the point that some people don’t start investing until they’re 30 or 40, you could give your child decades of compounding before their peers even started.

However, I didn’t mean in the slightest that it’s too late to start investing if you’re 30, 40, 50 or even 60. The older you are the higher your earning power is likely to be and there are still many, many years to go before that person hits the average Australian life expectancy.

According to the World Bank the average Australian’s life expectancy was 82 in 2015. This number is slowly but steadily increasing and many Australians will pass 90 or even the big 100. In my family alone, I have several members of my family who have reached over the age of 90.

The point I’m trying to make with these statistics is that nearly every Australian has decades of compounding still available to them.

Moneysmart has a great compound interest calculator which you can play around with to see how much you could growth your wealth by.

For example, if you start with an initial deposit of $5,000 and add $250 each month and compound that over 20 years with a (conservative) growth rate of 7% you end up with a balance of just over $150,000. I’d like to think that most people would be able to scrounge $3,000 together each year by cutting back on a few things.

Of course, if you start with a bigger deposit, add more each month, have longer to compound your wealth or manage to grow your wealth faster than 7% per year then you could be well on your way to $1 million or more.

Shares like Ramsay Health Care Limited (ASX: RHC), Challenger Ltd (ASX: CGF), InvoCare Limited (ASX: IVC) and Rural Funds Group (ASX: RFF) have all proven to be strong market-beating stocks since they listed.

Foolish takeaway

I believe that every person should try to invest in assets that will compound your wealth. Property can be a good way to grow your wealth, but I personally believe the best option is shares.

Looking for ideas to grow your wealth? Try these top growth shares.

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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited, InvoCare Limited, Ramsay Health Care Limited, and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Challenger Limited and RURALFUNDS STAPLED. The Motley Fool Australia has recommended Ramsay Health Care 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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