What Every Millennial Should Know about Investing
One formula for building wealth is pretty darned straightforward and simple: start saving at an earlier age.
When most people start to earn income in their late teens or early 20’s, retirement is very low on the list of priorities (if it is on the list at all). But millennials would be wise to rethink that approach, because a little saved today can go a long way in the future.
Just consider this hypothetical example:
- Person A is a high school student who earns a few thousand bucks each summer, and decides to put away $1,000 each year for four years, from age 15 to 18. Assuming she invested the money in an IRA and nets an average annual return of 7% (which is less than the long-term average of the stock market), she would have $107,000 by the age of 65. With just $4,000 total invested!
- Person B decides he wants to spend the money on whatever he wants in his high school and college years, and waits until age 25 to save $1,000 a year for four years. Starting later would mean a big opportunity cost – Person B would only have $50,000 by age 65 (if earning 7% annually).
Starting early can make a substantial difference.
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