Financial stability and wealth may seem out of reach for many millennials and Gen Zers, but Suze Orman believes that getting rich is achievable for these younger generations — if they make wise money decisions now.
Here’s what Orman says millennials and Gen Z need to do — and not do — to get rich.
Setting Aside a Small Amount of Money Each Month Will Build a Fortune Over Time
Orman believes that many young people don’t truly understand how much their money can grow over time if invested wisely.
“If there’s anything the younger generation needs to understand it’s that the key ingredient to any financial freedom recipe is compounding,” she said in an interview with Moneywise. “My favorite example that I love to use is that [if] you start, at 25, putting $100 a month into a Roth IRA and you do so every single month until you’re 65, at the age of 65 with a 12% annual average rate of return, you’d have $1 million.”
Orman said that “the key is small amounts.”
“If they just kept doing this month in and month out, and they did it for a long period of time, the amount of money they could have would be astronomical,” she said.
Many Young Americans Are Focused on the Now Rather Than the Future
Although putting aside $100 a month may seem like a small sacrifice to build a million-dollar fortune, Orman said that many young people don’t see it this way — which is a mistake.
“Their priority is their youth,” she said. “You think to yourself, ‘I’m still young, I like going out, it doesn’t really matter. What difference can $100 a month make? A hundred dollars a month over 12 months is $1,200, over 10 years it’s only $12,000. I’ll start at 35 rather than 25.'”
However, if you start setting aside $100 a month at age 35 rather than age 25, at 65 you’d have only $300,000 assuming a 12% return.
“Those 10 years cost you $700,000,” Orman said. “If you’re younger, don’t think that, ‘Oh, I’ll just grow up and make more money.’ No. You start right now and make your money grow, and you will have more money than you ever dreamt possible. You want to play and you want to have fun, that’s on you later on in life when you can’t pay your bills.”
More From GOBankingRates