Australian Business Network
It’s rare to find a self-made millionaire by age 20, as it usually takes decades to build true wealth. But it’s the early years of adulthood that can put people on the path to wealth faster than others.
The biggest wealth-building asset people in their 20s have is time. Combine this with the power of compound interest, and even small financial sacrifices made young can grow your money many times over throughout your lifetime.
If a 20-year-old has invested $10,000 tech company nvidia A decade ago, that outlay would be worth more than $2.5 million today. Sure, this would require some brilliant foresight, but it happens.
Not quite spectacular but still profitable, a 20-year-old who bought an average-priced investment property – possibly with help “Bank of Mom and Dad” – One of several capital cities a decade ago made nearly half a million dollars in paper profits during his 20s. Real estate remains the path to riches For many Australians, either a rental property or your own home increases in value, and serves as a platform for future investment to build equity.
Tony Catt, director of Catapult Wealth, said it was “very rare” to become rich in your 20s, and the most direct path was often a good business idea.
“Create your own business and make a better mousetrap – something no one would have thought of,” Mr Catt said.
Melanie Perkins and Cliff Obrecht, co-founders of graphic design software giant Canva, started their business in their mid-20s in early 2013, and by the end of their 20s they were worth an estimated $60 million. They are billionaires before the age of 30 and even today According to the list of Australia’s richest 250, each is worth an estimated $17.7 billion.
Mr Catt said people who invested in themselves during their 20s were “laying the platform and the foundation for the next 80 years”.
“It’s about building good habits, building financial discipline, education, and it’s about making mistakes but nothing serious or life-threatening,” he said.
Mr Catt said an enjoyable lifestyle is important for people in their 20s, but young adults can start a savings or investment plan to develop good money patterns.
He said, “The money you don’t see is the money you don’t lose.”
Mr Kat said he has noticed that more people aged over 20 are becoming stock market investors through the use of exchange-traded funds and investment apps.
The growing army of ETF investors includes Victoria Altomare, 29, who started buying them “as soon as she was out of high school” a decade ago.
“They can offer immediate diversification, they are low-cost, transparent and scalable,” Ms. Altomare said.
“At first, there was a lot of trial and error, but most importantly it was a lesson in the importance of continued education.”
Ms Altomare has also invested in property and gold and bought her first property in Melbourne at the age of 23.
“I feel very passionately about empowering young people – particularly female single applicants like me – to enter the property market despite facing real headwinds,” she said.
Diversifying investments is important for Ms. Altomare.
“While I understand why many people my age are cautious – especially with so much uncertainty about the future – I believe unpredictability is the only thing we can count on,” she said.
“I follow the FIRE movement – Financial Independence, Retire Early “And hopefully early retirement will be used as an opportunity to invest in projects that are making a positive impact.”
IG Markets analyst Tony Sycamore said social media has helped fuel a growing interest in stocks among people in their 20s, and for many it is replacing buying real estate.
“For previous generations, the dream of home ownership was the foundation for making investment decisions,” Mr. Sycamore said.
“For many people, it is now less accessible and even out of reach due to increased housing prices.
“This is driving younger generations to seek other avenues to invest for their future, which ultimately brings them into the market.”
Mr Sycamore said young adults were buying into cryptocurrency ETFs, which become available in Australia in 2024, and also adopting trading technology that did not exist two decades ago. He said this includes the increased use of AI in investment decision making.
Tips to make money in your 20s
The experts’ top tips for making your 20s a future rich include:
• Start investing early to enable compounding to work its magic over many years
• Try to invest 10 percent of your salary every month in an investment portfolio
• Focus on building a career, as increasing income provides increasing wealth
• Keep track of your spending and savings, and avoid high-interest consumer debt that can add up painfully.
• Try saving for a house deposit and consider government incentives to buy real estate
• Take advantage of retirement incentives for low- and middle-income workers.