Consider two 25-year-olds, Stacey and Ben.
Stacey chooses to 'chill out' with friends every second weekend instead of hitting the town. She estimates this saves her $500 each month.
Ben, meanwhile, loves a party, blowing $250 minimum each night he goes into town.
We have heard it all before, Stacey is smart. Ben is a loose unit…blah, blah, blah.
But what most of us 20-somethings underestimate are the little things. You don't need to be that guy.
You know the one.
The one who texts his invoice for petrol three weeks ahead of your long weekend away. I've got plenty of those friends. They make money awkward and annoying.
They make you not want to be around them. I get it.
Luckily, the little things are the things that make a difference down the track.
For example, instead of two lattes out with friends, have one. Have a couple beers
Have a couple beers before you hit the pub.
Shop online. Go out on the town every second weekend.
Go out on the town every second weekend.
What it means to you
Let's imagine Stacey puts her $500 to work each month in the sharemarket where she earns 7% per year, on average. For example, she might use an exchange-traded fund (ETF) to track the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
She starts today.
Under the 'Your Strategy' column above, we can see that Stacey's two nights with friends turns into a whopping $1.19 million at age 65.
Ben, who prefers to donate his cash to the barmaid, waits until 35 to begin saving and investing. Just 10 years later.
But here's the kicker: Ben needs to save $980 per month just to keep pace with Stacey, but he's already got two kids and a mortgage.
Notice the 'Regular Deposits' row above in the chart above, Ben's alternative strategy will see him add $353,520 to his savings plan while Stacey saves and invests just $240,000.
Why?
Compound interest, that's why. You see, while Ben was busy spilling espresso martinis on his new G-Star jeans, Stacey's $500 was making 7%.
And let's not forget, Stacey still went out. Just every second weekend.
And because she is smart, she got guys like Ben to subsidise part of her nights.
As I said, the little things.
Foolish Takeaway
Whether it's the eye-watering price of property, smashed avos, Chinese investors or financially savvy Gen Y's, more young people are turning to the sharemarket.
According to ASX Ltd (ASX: ASX), 20% of 18 to 24-year-olds invest in shares while that figure bounces to 39% of 25 to 34-year-olds. It's up from 24% five years ago. That's impressive.
As can be seen above, you don't to do much to build a great portfolio but you do need to start soon.
