How I Saved $100,000 By Age 25
By: Betterment Boss
Tags: Finance, Family, Money, Wealth, Life Lessons

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$100,000, the infamous start to six-figure wealth. At the age of 25, I was at a very exciting time in my life. I was just finishing my master’s degree and was working in consulting, traveling across the country, enjoying all the aspects of my newly started career. In fact, it was during these long trips that I did a lot of reflection, and on one occasion, I pondered how I was even able to amass this sum of money. After thinking about it for a while, it dawned on me that I had taken specific steps to ensure my wealth grew over time, and in this article, I will share with you seven steps I took to save up $100,000 by 25.

Step #1: Start Early

When it comes to succeeding in your money-saving journey, the sooner you start, the sooner you will reach your savings goals. It’s for this reason that I began to save from a very early age. I was lucky to grow up in a household that preached the importance of frugality and saving money, and whenever I would get money for my birthday or a holiday, instead of spending it on a new toy or video game, I put it in my piggy bank instead.

Now, while saving this money didn’t amount to much, maybe $5,000 during my adolescent years, what it did do was help me cultivate the habit of saving. You see, it can be easy to overlook saving when you aren’t able to accumulate much money; however, simply going through the motions of saving instead of spending is crucial as you begin to earn more money. And this was exactly the case when I got my first job at the age of 18.

From the age of 18 to 21, I worked in a grocery store part-time during college and full-time in the summers, and while this didn’t make me rich, it did help me see my savings rise much more than ever before. In fact, this is when I began to gain some financial confidence as seeing a 5-figure savings balance proved to me that my hard work was paying off.

Luckily during my later teens and early 20 years, I was very into reading and, more specifically, reading books on finance and early retirement. Not shockingly, these books preached the importance of investing early and often, and so at the age of 18, I bought my first stock in a Canadian Oil company. Within a year of holding that stock, I made around $1,000 in profit, and from that point forward, I was hooked on investing and began making regular contributions to my investment portfolio.

In fact, during this time, I came across one of my favorite investing quotes, which is that “It’s not timing the market that matters; it’s time in the market.” and starting at age 18 certainly contributed to my ability to save up $100,000 by the age of 25. And it’s no secret that I am a huge proponent of the power of compound interest. While my investments only sat in the market for 7 years from when I began until age 25, it certainly helped me increase my net worth and is why I continue to keep money in the market no matter how good or bad it is doing.

And this can sometimes be hard to do when the market is in decline, but it was the story of Jeff and Steve that truly solidified the importance of investing early and letting the market do all the work.

You see, in the story, Jeff began investing at age 25. He invested $10,000 every year for ten years and stopped completely at age 35. That initial $100,000 then sat in the market, earning the historical 7% return, and by age 65, Jeff had over $1,000,000 with just 10 years of contributions.

Then, there was Steve. Steve only started investing in his mid-30s, and because time wasn’t on his side as much as it was for Jeff, he had to invest $11,000 a year, every single year, from age 35 to 65, just to have the same lump sum at the end as Jeff. In case you didn’t do the math, Steve had to fork out an extra $230,000 over the course of his investing journey just to reach the same point as Jeff.

So what lesson did I learn from this story? Start now, and that goes for both saving and investing.