The Secret To Building Wealth in Your 20s 

The biggest mistake 20-somethings make is with the illusion of time. Everything seems distant because let’s be honest, most of us are barely scraping to meet society’s standards for success, much less invest for our retirement which could be 40 years in the future. It’s not a glaring priority for us. Yet – it should be. 

People currently in their 20s can be defined as the generation that works to live as opposed to living to work. This mindset has shocked much of the workforce, but it’s one we now see society adapting to. With that, most of us want the opportunity to retire sooner or have the flexibility to experience life as it happens in front of us. To do this, we have to nurture and replenish our investment accounts. 

Compound Interest

At 20 years old, time is on our side for investing. We can take on more risk because we have the tolerance to recover from market fluctuations. With fewer financial responsibilities, we have a larger percentage of our income that can be contributed to savings- this can help us build wealth. In addition, 20-somethings have the benefit of compound interest. This is what I would like to focus on, compound interest is the secret sauce to making our investments work for us with no additional cost. It is the interest calculated on your original investment. As you earn more money in your account, you earn more interest in your account. The cycle continues for years and years as interest rates fluctuate or remain the same. This is a way your money passively works for you without any aggressive strategy and can lead to long-term growth. 

It’s hard to turn on the news in our current financial climate and not hear about rising interest rates. While this is discouraging for those who are looking to borrow money right now. It can serve as encouragement for your savings account which may see an increased interest rate. Live Oak Bank is currently offering a 2.3% interest rate on savings accounts (Not Sponsored). That is almost the Fed’s target inflation rate, meaning your money could maintain its original market value and not depreciate.

Have more questions? Contact Us

Michaela Dowdy
Financial Planning Associate