A client sent the following email. It’s a great topic for high school graduates or any young person entering adulthood. So I thought I’d share:
At this time of year, I often think of high school graduates planning for their future. In this example, an 18-year old puts $200 of their graduation money into a Roth IRA, then adds less than $50 a week (about 3-hours at $15/hr) for 40 years. Investment returns are at S&P historic rates. The lesson here is that regularly contributing a meager amount can add up to over $1M.
It’s a simplistic example that ignores inflation, recessions, etc., but encourages action. Once this graduate begins to attain a nest egg, additional investments are virtually guaranteed.
My dad gave me some of the best financial advice I ever received while I was washing dishes in high school: “Save $200 a month and you’ll be a millionaire in 30 years.”
He said that in the 90s, when market returns were hovering around 15% — so the math was a little rosier than it is today. But the principle hasn’t changed. Small, consistent savings over time can lead to life-changing results. I just wish 18-year-olds had the patience to hear it and act on it.
Here are 3 tips that might get the ball rolling:
- Start with your first paycheck. The sooner you start, the sooner living below your means becomes a habit. Any earned income — a summer job, part-time work — makes you eligible to contribute to a Roth IRA. Think of it as paying yourself first, before lifestyle creep sets in.
- Ask for help. Here’s something most people don’t realize: the money deposited doesn’t have to come entirely from you — it just has to match what you earned. So if you made $2,400 this year, you can contribute up to $2,400 to a Roth. If a parent or grandparent wants to match your savings, their money counts too. You can contribute $1,200. They can give you $1,200 and you can put that in. That’s a powerful head start.
- Let it sit — time is your biggest advantage. A Roth IRA grows tax-free, and withdrawals in retirement are tax-free too. A graduate who contributes just $1,000/year from ages 18–25 — and never adds another dollar — can still outperform someone who starts at 35 and contributes for 30 years. Starting early beats contributing more, every time.
Takeaway
As a young high school graduate, you’re probably not thinking about retirement. But with the right influence, like my client, you can become a millionaire. You just need to start early and stay consistent. And if you get there through a Roth? Even better — because that money comes out tax-free when you need it most.
