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Here's how much money 25-year-olds need to invest every month to become a millionaire

Select asked Brian Stivers, Founder of Stivers Financial Services, to help us crunch the numbers.

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Gen Z income is expected to surpass that of millennials by 2031, according to a Bank of America report.
Lilly Roadstones | Getty Images

When it comes to investing, often times the million-dollar question everyone wants the answer to is, how much do I need to invest to become a millionaire?

Whether people like it or not, the short answer is, it depends.

And while there is so much advice out there when it comes to building wealth, one of the most important suggestions that is often repeated (for good reason) is to start investing as early as you can. Young people may just be beginning to divvy up their entry-level salaries among rent, student loan debt, an emergency fund and their social life, but they should also avoid putting investing on the back burner.

Select asked Brian Stivers, a Financial Advisor and Founder of Stivers Financial Services, to help us calculate exactly how much money 25-year-olds should invest each month to become a millionaire.

"When it comes to investing, there are three very important components: the amount you contribute monthly, your rate of return and how long you have to save," Stivers explained.

When crunching the numbers, Stivers accounted for three different return rates and used a retirement age of 65, which would give 25-year-olds 40 years to reach $1 million. Here's what we found:

  • A 25-year-old making investments that yield a 3% yearly return would have to invest $1100 per month for 40 years to reach $1 million.
  • If they instead make investments that give a 6% yearly return, they would have to invest $530 per month for 40 years to reach $1 million.
  • But if they choose more aggressive investments that yield a 9% yearly return, they would only need to invest $240 per month for 40 years to reach $1 million.

As we can see, a higher return can allow you to invest less money each month and still achieve the same goal. A 3% return is common for a more conservative portfolio of mostly bonds, whereas a 6% return is a bit more moderate and usually consists of a combination of stocks and bonds. However, a 9% return is on the more aggressive end and can usually be received through a portfolio that's stock heavy.

Keep in mind that when investing in stocks, you shouldn't just be throwing your money at random individual stocks. A tried and true strategy is to invest in index funds or ETFs that track the stock market as a whole, like the S&P 500. According to Investopedia, the S&P 500 has historically returned an average of 10% to 11% annually, so you might expect a fund tracking this index to produce similar returns. Note that past returns do not indicate future success.

Of course, a portfolio of mostly stocks is generally seen as more risky, but 25-year-olds are often said to have a larger risk tolerance since they have more time to weather market dips and recover after losses. But if you aren't sure how to create a portfolio that adequately reflects your risk capacity, robo-advisors like Wealthfront and Betterment can pick portfolios that best match your preferences.

Wealthfront

On Wealthfront's secure site
  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront annual management advisory fee is 0.25% of your account balance

  • Bonus

    None

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks

  • Educational resources

    Offers free financial planning for college planning, retirement and homebuying

Terms apply.

Betterment

On Betterment's secure site
  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, $0 minimum balance; Premium Investing requires a $100,000 minimum balance

  • Fees

    Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has a 0.40% annual fee

  • Bonus

    Up to one year of free management service with a qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment RetireGuide™ helps users plan for retirement

Terms apply.

If you want to directly purchase individual stocks, index funds and/or ETFs, then you'll want to open a fee-free brokerage account, like Schwab or Fidelity.

The other important element of investing Stivers mentioned is time. Thanks to compound interest, individuals in their 20's who want to retire in their 60's can invest less money each month compared to someone who starts investing in their 30's. But, according to a Business Insider and Insider Intelligence survey, 48% of millennials aren't investing because they don't think they earn enough money to do so.

There has long been a notion that you needed to already be rich in order to start investing. However, many investing apps allow users to invest in fractional shares — aka, a portion of a stock's share based on the amount of money you want to invest rather than the number of shares you want to purchase — with as little as $1. And, apps like Acorns even allow users to invest the "spare change" they accrue from making everyday purchases like coffee, textbooks and clothing.

But a rising cost of living and crippling student loan debt balances may also present challenges when it comes to feeling like you have enough money to cover your basic expenses and still invest for your future. As a result, 25-year-olds (and other people in their 20's and 30's) may feel like they don't even know how to free up some money to invest.

"I would start by encouraging them to look at three months' worth of their debit or credit card statements and create a list of where they're spending their money," Stivers suggested. Understanding where your money goes can help you identify any unnecessary expenses that have been eating up your income. Then, you can cut back on those things and free up more of your money to put toward investing and expenses you actually care about.

And of course, when it comes to investing, one of the most impactful things you can do is to just start — even if you only begin by contributing a small amount of money. "I tell clients if you aren't investing now, just start somewhere," Stivers said. "If you can't contribute $30 per week, maybe you can just invest $10 per week. Just getting into the habit of investing small amounts can help."

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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