An open letter to everyone under 30

Dear Millennials,

There’s an old story about a guy taking a smoke break with his non-smoking colleague.

“How long have you been smoking for?” the colleague asks.

“Thirty years,” says the smoker.

“Thirty years!” marvels the co-worker. “That costs so much money. At 3 packs a week, you’re spending $3,120 a year. Had you instead invested that money at a 9% return for the last 30 years, you’d have $460,000 in the bank today. That’s enough to buy a Ferrari.”

The smoker looked puzzled. “Do you smoke?” he asked his co-worker.


“So where is your Ferrari?”

Where are all the Ferraris?

When you think about money and saving, stop, look around, and ask yourself: Where are all the Ferraris?

Sure, not everyone with $460,000 should buy a Ferrari, or even wants one. But the Federal election campaign was characterised by both major parties sympathising with ‘cost of living pressures’ being felt by Australians.

How can so many Australians be so poor if accumulating a lot of money over time is as simple as saving a few dollars a day?

Because most people don’t take advantage of what you Millennials have in spades: Time.

You have time on your side. Decades in front of you to save and invest. It’s the biggest financial asset you own today, and you’re probably not even aware of it. The single best thing you can do for your finances is to realise how valuable it is.

I know you, Millennials. When you think about building money for retirement, you focus on earning more money later in your career. And why not? You’ll likely earn far more in your 40s and 50s than in your 20s and 30s. Waiting until you have a nice fat pay cheque before you save money makes sense, right?


Better than doubling your income

The average Australian aged 15 to 29 earns $789 a week, according to the Australian Bureau of Statistics. That compares to the average 50-something wage of $1,515. So, by the time you’re in your 50s you can expect to earn about double what you earned in your teens and 20s Optimistically.

Compare that to the value of money saved and invested in your 20s and 30s, and we’re not in the same ballpark.

For the last 112 years, the ASX has delivered an average annual return of 11.3%, or 7.2% after inflation. During that period, we had major wars, recessions, financial crises, and an uncountable number of really awful things happen to the economy. Through it all, a 7.2% real return is what we averaged. It’s the best estimate we have of what stocks will return over the next many decades.

And lucky you, earning a 7.2% return on your savings does nothing short of miracles over time. If you are 20 years old, every dollar you save today will be worth $21.30 by the time you are 65 (and that’s adjusted for historical inflation). If you’re 30, each dollar saved today will be worth $10.63 by age 65.

Think about that. From the time you are in your 20s and 30s until your 60s, your weekly wages might double. But money saved in your 20s and 30s could very realistically grow tenfold by the time you reach your 60s.

Saving a little bit of money when you are young can be a more efficient way to build wealth than saving a lot when you’re older.

Saving is hard – but worth it

I know the economy ‘feels’ tough, Millennials. And most of you lucky enough to have a job feel as if your pay cheques round to zero.

I get it. I’ve been there, too. But don’t overlook the incredible asset you have in time. Time allows the market to do the heavy-lifting wealth-building for you.

Take advantage of that any way you can. $20 a month. $100 a month. Whatever. Any small amount you save now will likely be more important to your long-term wealth than much larger amounts saved when you’re older and earning more money.

This might sound basic and boring, but in 40 years, you will not care what the 200-day moving average is, or how many basis points the RBA cut interest rates next month, or the short-term forecast of another well-dressed analyst with plenty of buzzwords at his disposal. I promise. What will matter is whether or not you saved money and invested it for the long haul.

Foolish takeaway

I know you, Millennials. You’re spending $5, $10 a day on stupid stuff you probably don’t even like while working tirelessly in college and work to boost your future earnings. Once you realise cutting out the former can be as important to your finances as trying to boost the latter, you might find yourself closer to your goals. That’s how you leverage your assets. That’s how you turn cigarettes into Ferraris.

Good luck.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get 3 Stocks for the Great Dividend Boom in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

A version of this article, written by Morgan Housel, originally appeared on

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.