Millennial and Gen Z workers could make an astronomical amount of money if they take advantage of the one obvious factor thats working in their favor: time.
By taking advantage of the years ahead of them and saving early, the renowned financial expert, Suze Orman, believes that Gen Z workers have the potential to retire as millionaires.
You start right now in making your money grow and youll have more money than you ever dreamt possible, she told Moneywise while adding that delaying your investment journey by a mere 10 years could cost you $700,000.
Unlike Gen X and baby boomers, time is on your side
Investing in your future self can be a hard notion to grasp when youre in your early twenties and simply enjoying life.
But its a mentality that will cost youliterally thousands according to Orman.
You want to play and have fun, thats on you later on in life when you cant pay your bills, Orman told Moneywise.
Their priority is their youth, their priority is time, she said. If theres anything the younger generation needs to understand, its that the key ingredient to any financial freedom recipe is compounding.
She used just $100 to highlight how powerful compound growth is.
By investing $100 every month from the ages of 25 to 65 into the likes of a Roth individual retirement account (IRA), Gen Z could retire as millionaires.
With a 12% annual average rate of return the markets can do that for you youd have a million dollars, she explains.
Depositing a monthly investment of $100 into an account with a 12% yield would net someone approximately $1,188,342 in 40 years time.
But heres the catch: the longer you delay your investment journey, the lower the accumulated amount of money will be.
A millennial who is just 5 years older when they start their investment journey at 30, would accumulate around $649,626 by 65 years oldshockingly, a mere 5 years is enough to slash the return by almost half.
Meanwhile, waiting ten years to start your investment journey, would could you $700,000, as Orman points out.
Of course, this is a simplified calculation that doesnt take into account taxes or account limitationsfor instance, if your income is over $153,000 you cannot contribute at allbut it highlights why time really is young peoples greatest asset when it comes to building wealth.
12% could be conservative, says Orman
The 12% annual average rate of return which would make a Gen Z worker a millionaire before the age of retirement, is a conservative percentage, according to Orman who estimates you can expect up to a 25% rate of return on your money.
Its why the financial guru insists Gen Z take advantage of employer-sponsored savings vehicles like 401(k)s and IRAs, which offer tax benefits and potential employer matches, as well as, exploring investing apps that require minimal initial investment.
If you commit to this process month in and month out and you do it for a long period of time the amount of money [you] could have would be astronomical
