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Wisdom of old: start when you're young

"Study hard until you're 25 - what you learn during this time will help you earn until you're 60. Work hard until you're 60 - what you earn during this time will help you save for your retired life until you're 90!"

My father shared those words of wisdom with me when I was young. It's easy to understand why most young workers don't think much about retirement, though - 20-somethings are usually more concerned with kick-starting their careers, not ending them in the distant future.

If you're smart, you'll grab the opportunity to start saving early for retirement, when the beauty of compound interest can work its magic and maximize your savings. Consider this scenario: If you start saving for retirement at 25, putting away AED 6,000 a year (that's AED 500 a month) for 35 years, you'll end up with about AED 1 million when you retire (assuming earnings grow at 7.5% annually). If you wait until you're 35, you've got just 25 years until retirement to put that same AED 6,000 a year to work for you - so at the same annual growth rate, you get around AED 450,000 when you retire - less than half the money!

"Forget investment - I'm barely out of credit card debt!"
Before you start investing, get yourself out of the red. Credit cards can be a great financial tool if managed properly, but you pay more interest on credit cards than you'll ever earn on investments. All credit card companies earn profits, pay staff salaries and bonuses and offer attractive cash-back incentives to customers from the money they make on late payment fees and interest - so make it a point to pay your credit card's complete outstanding amount by the due date.

investment-pyramid.jpgWider is better
Investment types perform differently under dynamic market conditions, so it's important that you have a wide variety. Known as diversification, owning different types of investments help reduce your risk, and potentially increase returns within your portfolio.

Your investment mix could include investments from each level of this pyramid. The amount at each level depends on your personal situation and level of risk tolerance. Remember this golden rule: always start from the base of the pyramid and move up.

Although you might have limited investible surplus early on in your career, age is on your side. Be regular and systematic in your investment pattern, and you're sure to retire wealthy. My father's advice hasn't failed me yet!

Have any good investment tips that family or friends shared with you? Feel free to pass them along here!