Do you want to get rich in your twenties? Stop spending money. Now.
You might not be able to drive a Maserati to your first high school reunion, but you might be able to by your second one, if you start saving money NOW.
How, you ask? Saving money is boring, menial, and totally lame. What about “investing?” What about “entrepreneurship?” What about “side-hustle?” I want money now!
There’s no guarantee that you’ll make any money in investing, opening your own business, or playing in the stock market. What WILL make money is interest, over time. As a young person in your twenties, time is on your side – if you act now.
The Power of Interest
Four percent interest might sound pretty low right now – and it is. Most students and college graduates are living paycheck to paycheck – getting 4% sounds almost like a waste of time. Right? Wrong. Four percent becomes very powerful over time.
Let’s say you invest $2,000 a year into a high-interest savings account in your twenties, each year for 10 years. Most workers at full-time jobs can do this, easy. That’s not even $200 a month. Over time, that 4% interest rate might make you a couple hundred extra bucks a year, but by the time you reach the end of those 10 years, the numbers will be exponentially bigger, and those hundred will turn into thousands, and then some.
This isn’t some magical investment trick – it’s simple math that anyone can work with. If you calculate these numbers with Schwab’s Roth IRA conversion calculator you’ll see the benefits add up in time. Unfortunately, many young people want money and dividends now, and they refuse to invest in the future. How many rewards work that way? Do we see instant results when we first start exercising, when we first open a business, or when we first start on a project? These all take time, and so does money. It’s the people who stay at the gym for months, working out consistently, that reach their fitness goals. The same goes for those who want to get rich – through consistent routines that might seem boring and fruitless.
Imagine what those interest rates will pay you in 20 years. 30 years. When you’re retired. Instead of spending every dime you get every month, save 10% (or even less) and put it into a high-interest fund or a Roth IRA. It might not be elaborate and you might know a couple people who hit it big in business and drink champagne every day, but don’t be fooled by the glamour of fame and fortune and resent the fact that fortune hasn’t chosen you.
Start saving today. Get informed on how interest rates and savings accounts work – the hardest part will be to consistently put money in those accounts, but those who do will find themselves with a nice car to show off…later.