How wealthy should you be at your age?

Are you as wealthy as you should be?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Wealth and income are seen as two of the best measures for how well you're doing at life. People are inherently private about their money, but luckily the Australian Bureau of Statistics (ABS) has the inside scoop.

At the end of FY16 the median household net worth was $527,000. A big portion of this amount will be equity in their house and that figure doesn't account for age.

Most household wealth is their house and superannuation assets, which will mostly be invested in a similar fashion to Vanguard Australian Share ETF (ASX: VAS) and Vanguard MSCI Index International Shares ETF (ASX: VGS), except with much higher management costs.

According to Suncorp Group Ltd (ASX: SUN), the 'millennial' generation is actually doing a fine job of saving. Monique Reynolds, Suncorp Bank Regional Manager said "On average, Australians aged 25 to 34 are saving $533 per month (12.7 per cent of their personal income). This is $100 more than the national average (11.5 per cent or $427)."

The above suggests that Generation Y have a good savings habit. Considering the average full-time wage in Australia is currently $83,000, then 9.5% of this figure for super is almost $8,000 a year. Over 40 years that adds up to well over $320,000, with no compounding effects.

The average Australian can probably look forward to super balances of well over $1,000,000 assuming they have a low-cost super fund and are invested predominately in growth assets.

A recent InvestSmart article suggested that if a 22 year old puts aside the $533 a month and achieves real returns (after inflation) of 6% then they'll have $73,000 by 30. With a few alterations with higher earnings and a lower savings rate due to promotions and life changes, that person could hit $218,000 by 40, $500,000 by 50 and $1 million by 60.

Of course, spreadsheet calculations makes things look easy. Things look decidedly more difficult for the newest cohort of adults with the growing cost of university, huge housing costs and low wage growth.

But, no-one is saying the average person will hit $10 million. Hitting $1 million is quite achievable for people willing to live materially below their means and invest in growth assets for the long-term.

If some of the above net worth figures seem too difficult, just play around with MoneySmart's wealth calculator to see what you could achieve. Remember, the long-running average share market return has been 10% over the past few decades.

Foolish takeaway

Everyone has different sets of circumstances. Some people have wealthy parents to help out, others are battling high costs with low wages. Whatever your situation, it's possible to achieve surprising wealth if you can just stash a little into the share market every month or two and hold something like iShares S&P 500 ETF (ASX: IVV) for the long-term.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Personal Finance

three businessmen high five each other outside an office building with graphic images of graphs and metrics superimposed on the shot.
Personal Finance

3 personal finance tips to help anyone grow richer

Our portfolios can do better with the right financial foundations.

Read more »

Businesswoman whispering in male colleague's ear as he looks surprised
Investing Strategies

5 secrets of ASX millionaires

Wealthy people come in all sorts of shapes and sizes, but they all have some common habits that we could…

Read more »

Three generations of male family members enjoy the company as they plan future financial goals together on a trek outdoors.
Personal Finance

Is 60 too old to start buying ASX shares?

It's never too late to benefit from the wonders of the share market.

Read more »

Woman and man calculating a dividend yield.
Personal Finance

Becoming a millionaire: Why savings accounts aren't the answer

Even high-interest savings accounts can't compete with the returns of ASX shares.

Read more »

Tiger staring with a black background.
How to invest

How to make 7% interest while deciding which ASX shares to buy

Also receive Tesla stock for your trouble of just sitting around.

Read more »

Two people comparing and analysing material.
Personal Finance

How does investing in a term deposit compare with buying ASX shares?

Term deposits look attractive for income, but do they beat ASX shares?

Read more »

Woman with headphones on relaxing and looking at her phone happily.
Personal Finance

How quickly could I build a $30k annual passive income with ASX shares?

The stock market can deliver great yields.

Read more »

Woman smiling with her hands behind her back on her couch, symbolising passive income.
Personal Finance

5 ways to get richer in 2024 without a pay rise

You don't need a pay rise to build your wealth in 2024.

Read more »