Here’s how much 25-year-olds should invest each month to become a millionaire

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When it comes to investing, often the million dollar question everyone wants the answer to is, how much do I need to invest to become a millionaire?

Whether people like it or not, the short answer is, it depends.

And while there are a lot of wealth building tips out there, one of the most important suggestions that gets repeated often (for good reason) is to start investing as early as possible. Young people may be just starting to divide their entry salaries between rent, student debt, an emergency fund and their social life, but they should also avoid putting the investment on the back burner.

Select asked Brian Stivers, financial advisor and founder of Stivers Financial Services, to help us calculate exactly how much money 25-year-olds should invest each month to become a millionaire.

“When it comes to investing, there are three very important things: how much you contribute monthly, your rate of return, and how long you need to save,” Stivers explained.

In calculating the numbers, Stivers took into account three different rates of return and used a retirement age of 65, which would give 25-year-olds 40 to reach $ 1 million. Here is what we found:

  • A 25-year-old making investments that earn a 3% annual return would have to invest $ 1,100 per month for 40 years to reach $ 1 million.
  • If they instead make investments that give a 6% annual return, they would have to invest $ 530 per month for 40 years to reach $ 1 million.
  • But if they choose more aggressive investments that pay a 9% annual return, they would only need to invest $ 240 per month for 40 years to reach $ 1 million.

As we can see, a higher return can allow you to invest less money each month while still achieving the same goal. A 3% return is common for a more conservative portfolio of mostly bonds, while a 6% return is a bit more subdued and usually consists of a combination of stocks and bonds. However, a 9% return is more aggressive and can usually be achieved through a portfolio rich in stocks.

Keep in mind that when investing in stocks, you shouldn’t just throw your money at random individual stocks. One proven strategy is to invest in index funds or ETFs that track the stock market as a whole, such as the S&P 500. According to Investopedia, the S&P 500 has historically returned an average of 10% to 11% per year, so you could expect a fund tracking this index to produce similar returns. Note that past returns do not indicate future success.

Of course, a portfolio consisting primarily of stocks is generally considered to be riskier, but 25-year-olds are often said to have a higher tolerance for risk as they have more time to weather market declines and recover from market downturns. losses. But if you don’t know how to create a portfolio that adequately reflects your risk capacity, robo-advisers like Wealthfront and Betterment can choose the portfolios that best suit your preferences.

Wealth front

On the secure Wealthfront site

  • Minimum deposit and balance

    The minimum deposit and balance requirements may vary depending on the investment vehicle chosen. Minimum deposit of $ 500 for investment accounts

  • Costs

    The fees may vary depending on the chosen investment vehicle. No account, transfer, transaction or commission fees (fund ratios may apply). Wealthfront’s annual management advisory fee is 0.25% of your account balance

  • Premium

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources, and dividend-paying stocks

  • Educational resources

    Offers free financial planning for college planning, retirement, and home buying


On the secure Betterment site

  • Minimum deposit and balance

    The minimum deposit and balance requirements may vary depending on the investment vehicle chosen. For Betterment Digital Investing, minimum balance of $ 0; Premium Investing requires a minimum balance of $ 100,000

  • Costs

    The fees may vary depending on the chosen investment vehicle. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has an annual fee of 0.40%

  • Premium

    Up to one year of free management service with a qualifying deposit within 45 days of registration. Valid only for new individual investment accounts with Betterment LLC

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment RetireGuide ™ helps users plan for retirement

If you want to buy individual stocks, index funds and / or ETFs directly, then you will need to open a brokerage account with no fees, such as Schwab or Fidelity.

The other important part of Stivers’ investment mentioned is time. With compound interest, people in their 20s who want to retire in their 60s can invest less money each month compared to someone who is starting to invest in their 30s. But, according to a Business Insider and Insider Intelligence survey, 48% of millennials don’t invest because they think they don’t make enough money to do so.

The idea was long ago that you had to already be rich to start investing. However, many investing apps allow users to invest in fractions of shares – that is, part of a stock based on how much you want to invest rather than how many stocks you want to invest. you want to buy – with as little as $ 1. And, apps like Acorns even allow users to invest the “extra currency” they earn by making daily purchases like coffee, books, and clothing.

But the rising cost of living and crippling student debt balances can also present challenges when it comes to feeling like you have enough money to cover your basic expenses while investing for your future. As a result, 25-year-olds (and others in their 20s and 30s) may feel like they don’t even know how to make the money to invest.

“I would start by encouraging them to look at the three-month value of their debit or credit card statements and create a list of where they spend their money,” Stivers suggested. Understanding where your money is going can help you identify unnecessary expenses that have eaten away at your income. Then you can cut back on those expenses and free up more of your money for investing and spending that you are really interested in.

And of course, when it comes to investing, one of the most effective things you can do is get started, even if you only start by contributing a small amount of money. “I tell clients if you don’t invest now, just start somewhere,” Stivers said. “If you can’t contribute $ 30 a week, maybe you can just invest $ 10 a week. Just getting into the habit of investing small amounts can help.

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.

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