How many years do you think it would take to hit $1 million with just your childhood savings? If you’re a student with a mind for investing or a parent looking to set your kid up to have real money, listen up.

In this article, I’m going to lay out two paths that are guaranteed to get you there with just average investment returns.

With each route, I will show you how little you need to invest to get to $1 million. I did the math, so you don’t have to.

On the go? Watch my video:

Let’s get into it.

### The First Path

The first path that I want to dive into is also the one that will work for most students, and I’m kicking myself for not doing it when I was in school.

If you’re 18 years old in college, you work part-time during school or seasonally during the summer or Christmas break, then opening a Roth IRA is the way to go for three reasons.

#### Reason 1

The first reason is taxes.

You don’t have to pay them. You may not care about taxes now if you’re a broke college student who doesn’t pay taxes anyway, but you will when you have a million dollars. We could be talking $150,000 to $300,000 in taxes if you accumulate more than $1 million in your Roth. It really depends on your tax bracket at the time.

Comparison between brokerage, Traditional IRA, and Roth IRA

When you deposit money into a Roth IRA and invest in the stock market, you do not have to pay taxes on any of your gains. Normally, when you get money from dividends or you sell one share to buy another, you are taxed on your profits. However, when you invest in a Roth IRA, your money is shielded from taxes.

#### Reason 2

The second reason is flexibility.

I know it sounds a little sketchy to lock your money away in a retirement account when you’re so young. What if you have an unexpected opportunity and you’re kicking yourself because you sealed off your precious savings?

This is where the Roth IRA shines over other retirement accounts.

With the Roth, you can withdraw your initial investment from your account without penalty.

#### Reason 3

The third reason is free money.

If you open your Roth IRA with Robinhood, they will match up to 3% of your IRA deposit every year. To my knowledge, Robinhood is the only brokerage that will do this.

So hypothetically, if you put $5,000 into your Roth IRA, Robinhood will deposit $150 in there as well. Also, you get a little $25 signup bonus, but that doesn’t make a huge difference.

#### Math, Math, Baby

In any case, let’s get into the math. How many years do you think your college investments will need to become 1 million?

In 2023, you can put up to $6,500 in your Roth IRA.

If you open a Roth IRA with Robinhood and utilize the 3% match, you only need to deposit $6,310 to get the full $6,500 in there. That’s about $525 per month or $120 per week. Definitely doable if you work part-time during the school year.

After paying the $5 Robinhood Gold monthly fee, this is $130 in free money every year. If you’re topping off your Roth IRA with the full $6,500, then paying for the membership is worth it.

Average Salary for Students in 2023

According to ZipRecruiter, the average salary for a college student is around $2,628 per month. That means you would have to put aside 20% of your income to scrounge up $6,310 in a year. That’s definitely not easy for a college student, but it is doable.

#### Money is In There, Now What?

So, you’ve managed to cram $6,500 into your Roth in year one. That is awesome, but now you have to invest it.

I recommend investing in stocks instead of fixed-interest investments like bonds, treasuries, or money market accounts. Bonds and treasuries are very safe and have predictable returns while investing in the stock market has risk and volatility. But if you stay invested in the stock market for many years, you will likely come out on top.

Comparison between Stocks VS Bonds

If you look at the historic stock market returns of the top 500 companies in the US, you will have an average annualized return of 10.15%.

For this analysis, we are going to roll with this 10.15% return that you would get if you invested in an S&P 500 index fund, which basically tracks the top 500 US companies.

Most investors look at the performance of the S&P 500 to determine how the US economy is doing as a whole. Now, before you start investing, you should at least learn the stock market basics.

#### How Many Years to Get to $1M?

Finally, let’s get into the results of the first path, which is investing throughout college.

If you invest $6,500 in the S&P 500 per year while in college from 18 to 22 years old (4 years), you will graduate with approximately $33,302 in your Roth IRA. That’s not bad for tax-free money.

Investing $6,500 Every Year in a Roth IRA for 4 Years

Now, if you decide to never invest in that account again, you just forget about it and go about your new postgraduate life, that Roth IRA will continue to grow.

In 36 years, when you randomly decide to check that account at the age of 57 years old, you will be greeted with just over $1 million. Not bad, but not amazing. Don’t worry. It gets better. When you reach 65 years old, at the average retirement age, you will have $2.34 million dollars.

Keep in mind, this is essentially beer and food money that you decided not to spend just while you were in college. And this is nothing compared to what is possible in the second path, which we will get to shortly.

Investing $6,500 Every Year in a Roth IRA from age 18

Instead of forgetting about the account, you could also continue to invest in your Roth IRA every year after you graduate. Investing $6,500 every year post-graduation will get you to $1 million 11 years sooner at 46 years old.

And then, if you continue investing that $6,500, when you reach 65 years old when you’re about ready to retire, get ready for it, you will have $7.24 million.

Keep in mind that this is assuming just average stock market returns and a weekly investment of just $120. That is absolutely insane to me, but let’s get into the second path.

### The Second Path

Path two takes even greater advantage of compounding interest.

Did you notice in the last example that it would take about 29 years of investing from 18 to 46 to reach $1 million? Then after the next 19 years, we were able to jump to over $7 million. This perfectly illustrates the power of compounding interest.

The more time you’re invested, the faster your profits will stack up.

#### Problem 1

Unfortunately, you cannot open a Roth IRA until you’re at least 18 years old, but there is a workaround if the parents are willing to help.

#### Problem 2

The other issue that we need to solve is income.

Finding a job for a baby is not easy, but you can do it. I bet the Gerber baby models have fat IRAs.

But seriously, there are many ways you can legally show the IRS that you have earned income for your Roth IRA, not just a job with your typical employer.

The one that really jumps out at me is getting paid by your parents for doing chores around the house.

You can also babysit, walk dogs, or feed your neighbor’s pets when they’re out of town.

#### Math, Math, Baby

So there are ways to solve the difficulties of opening a Roth IRA as a baby but let’s start with a high schooler.

It is not uncommon for high schoolers to work part-time jobs during the year or over the summer. On top of that, there are more creative sources of income that we talked about earlier.

Investing $6,500 Every Year in a Roth IRA for 8 Years

Once again, let’s assume a high schooler is able to scrounge up $120 per week to achieve $6,500 per year, which includes the Robinhood 3% match.

After just four years of investing during high school and four more years of investing during college (8 years total), you will have $82,326 by 22 years old tax-free. And again, that is assuming just average stock market returns.

Talk about passive income.

#### How Many Years to Get to $1M?

If you then forget about the account not putting in another dime, you’ll reach $1 million at the age of 47 and $5.79 million at the age of 65. That is insane for just investing as a student.

Investing $6,500 Every Year in a Roth IRA from age 14

Now, if you decide to continue investing after graduation, you will hit your first $1 million at the age of 42 and you will hit $10.68 million at the age of 65. Wow. But wait, there’s more.

#### How Much Could You Get Investing Since 10 Years Old?

If you are lucky to have financially-savvy parents to have hooked you up with a Roth Custodial IRA and a job cleaning dishes, vacuuming, mowing, or whatever else since you were 10, then you will have nearly $155,000 by the age of 22.

How many 22-year-olds do you know who have $155,000 sitting in a Roth IRA tax-free that they earned just by investing their chore money?

Investing $6,500 Every Year in a Roth IRA for 12 Years

If you then forget about the account not putting in another cent, you will reach $1 million at the age of 41 and $10.85 million at the age of 65.

That’s without doing anything. That’s just the money that you invested as a student. Remember, this is with average stock market returns.

Investing $6,500 Every Year in a Roth IRA from age 10

Finally, if you decide to continue investing after graduation, putting in $6,500 every year, you will hit your first $1 million at the age of 38 and $15.74 million at the age of 65.

I don’t know about you, but I find that inspiring.

Just investing $120 per week can become more than $15 million if you start early enough. That is a small price to pay for financial independence.

Going back to the question that I asked at the beginning of the article, how many years did you think it would take to hit a million dollars with just your childhood savings? Were you able to guess? Are you surprised that you could get there at 38 years old?

Just keep in mind, your education is also a huge investment in your future. Be sure not to risk the money in the stock market that you need in the next seven to ten years to fund your education because you do risk losing money in the short term.

If you want to be able to successfully navigate the stock market, check out Why S&P 500 is the Best Index Fund for the Average Investor | Stock Market Explained for Beginners.

Until next time.