The “College Hack” to Becoming a Millionaire

How Starting in your 20s Will Build a Pathway Towards Wealth

If a 20 year old invests $95 a month (approximately $3.17 a day- the price of a cup of coffee) in the stock market, they would be a millionaire by the age of 65. If you can swing 100 more dollars, now we are in multimillionaire status. This is the magic of compound interest. It seems simple enough and it isn’t new information. But more than half of American households have no retirement savings. On top of that, according to USAFacts, only 15% of 65-69 year olds have more than $500,000 saved for retirement. So if it’s really that simple, why aren’t there more retired millionaires? The math works out but reality isn’t easy because of a lack of early financial education, on top of systematic and psychological obstacles, preventing people from building financial wealth.

When people hear the term “broke college student,” they picture cup noodles, grabbing extra napkins from the dining halls, or working part-time to cover basic living expenses with family support. As a student, it may feel like we are on hold for financial responsibilities, but these “broke” years in our 20s are actually our most high-valued years for wealth building and putting this hold might be one of the most expensive pauses in our financial career.

Yahoo! Finance reports that the average age a person starts investing is around 33. By that age, to “catch up”, they would need to invest $483 a month to be a millionaire by retirement. This is more than five times the $95 amount if they had started when they were 20. It is even harder to invest because the 30’s typically come with expensive milestones: a wedding, children, and travel, to name a few. So waiting for that adult paycheck as a reason to hold off investing might be a costly blunder.

Dr. Sam Liu, an economics professor at West Valley College, with a Ph.D. in Economics from MIT, explains this through one of his favorite proverbs:

“When is the best time to plant a tree? The answer is, 20 years ago. The second best time? Now.” 

The same goes for investing. You can’t go back and start earlier. But you can start today.

Personal finance is not one-size-fits all because it's personal. Everyone has different goals, responsibilities, and starting points. Some students may be supporting families. Others are figuring out financial aid, debt, or creating a budget for the first time. 

But that doesn’t mean opportunity doesn’t exist. 

According to the Bureau of Labor Statistics, as of October 2023, 51.7% of 16-24 year olds were employed. This means more than half of young adults have earned income which helps them take advantage of the most effective wealth-building tool, the Roth IRA, a tax-free retirement account. (The release of this article being April 15, tax day, means that you can still make your 2025 contributions.)

Starting early doesn’t mean starting big. With all the free or low-cost options we have in the digital world, even $20 can get you in the game. For many people, $95 a month can seem unrealistic because of limited income, lack of access to financial tools, or systemic inequality. Entry to building a healthy relationship with money can be hard. 

Beyond these physical limitations, cultural and psychological barriers exist as well. Right now, the financial world for young people is unhealthy. The world is a distraction machine of information overload from meme crypto-coins to ponzi scheme trends. These short term gambles will not lead to steady, proven growth when investing in the stock market. The S&P 500, one of the most important measures of the U.S. stock market, is a list of the 500 largest publicly traded companies. Over the last 150 years, it has delivered an average annual return of 9-10%. Warren Buffet, outstanding investor and billionaire, repeatedly advises to own a low-cost S&P 500 index fund and specifically Vanguard 500 Index Fund ETF (VOO).

One of the bigger obstacles for young people to start isn’t a lack of money but a behavior bias that Dr. Liu explains as "cognitive myopia” or mental nearsightedness. It is difficult for a 20 year old to “see” their 65 year old self. People will tend to value what they can get now, like late-night Uber Eats or dining out, over long-term rewards that feel far away. There’s also fear of losing money, making a mistake, or not knowing enough to start. All this can lead to procrastination and in-action. Early financial mistakes can be recovered, but lost time cannot. 

At the same time, consumer culture tells us to be a spender over an investor especially on social media. When income increases, so does lifestyle, like nicer living situations, nicer experiences, and finer foods. This is the lifestyle creep. Dr. Liu suggests avoiding this trap by committing to saving or investing half of your raise or your bonus rather than spending it on material things. He advises having automated systems to invest your money. That could be setting up auto transfers to your Roth IRA or brokerage account every month. It turns saving from something that you have to decide to something that simply happens.

Financial education isn’t about math; it's about learning to make independent financial decisions and understanding trade-offs. For college students, the goal shouldn’t be viral trends or “get rich quick” schemes; it should be about building and developing a healthy foundation to their own personal finance. The ultimate “college hack” is not a shortcut but having time in the market. The clock is ticking, the tree is waiting to be planted, and while the best time to start might have been years ago, the second best time is still today.