Q: Hi Dav, I’m in my 30s and still have a bit more to go before I clear my student loan. Should I wait until I’ve paid it all off before I start to invest?
A: The earlier you start investing, the better – that’s the short answer here. There’s no reason your student loan should completely close down your financial horizons until it’s entirely paid off. Of course, it’s important to ensure you’re setting aside regular income instalments to go towards clearing the debt, but investing at the same time is a smart-money move.
Multi-tasking is in our favour
The best play you can make is building an investment portfolio while you’re still paying off your loan. That way, you won’t be jolted from a standing start once you’ve paid off all the debt. Instead, you’ll have gained investment momentum and experience alongside clearing your loan. This applies no matter what point you’re starting from: it pays off to get your head in the investment game regardless of whether you’re close to paying off the final instalments or you’re a new grad right at the start of your loan repayments.
Start early to maximise compound growth
Compound interest growth helps the money you invest to gain higher returns, faster. Essentially, it’s a snowball effect: the interest on any investments you make will be based on the interest they accumulate over time, as well as the original interest rate. As your original investments grow, the income you earn from them grows in tandem.
Your loan debt isn’t your whole financial story
Student loans are often an intimidatingly large sum to pay off – especially given the financial hit the economy’s taken recently. For some recent grads, it may be a while before they hit the salary threshold required to start paying off their loan. Whatever your personal circumstances, it’s in your interest to invest alongside planned payments towards clearing your debt. Take the reins on both and you’ll be in a strong financial position when the loan hits that long-awaited zero.
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