Thousands of college graduates are entering adulthood and may need to start thinking more about money management.
Author, self-made millionaire, and host of the I Will Teach You to be Rich podcast Ramit Sethi revealed the ‘simple’ step for college graduates to be financially successful in the future.
According to NBC 10 Philadelphia, Sethi’s advice for college graduates to achieve financial success is ‘invest 10 percent’ of their salaries every year.
‘At the end of the year, increase that by one percent. Do this for as long as you can and you will be a multimillionaire,’ he told CNBC Make It earlier this month.
Sethi, who also starred in the 2023 Netflix docuseries How to Get Rich, has years of professional experience and is the founder of IWT.
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According to Sethi’s LinkedIn, his parents immigrated to the US in the 1970s from India.
‘With four kids and one income, they couldn’t afford to send me to college so I built a system to apply 60+ scholarships,’ he wrote in his profile description.
He went on to receive a full scholarship to Stanford University, where he earned bachelor’s and master’s degrees in 2004 and 2005.
However, after graduation, he admitted that he took his first scholarship check, invested it in the stock market, and lost around half of it almost immediately.
This incident inspired him to learn about money and that what he learned during his schooling was ‘irrelevant.’
Today, he runs IWT – a website that hosts over one million readers a month that are interested in learning more about business, careers, negotiation, psychology, and money.
His 2009 New York Times Best Seller I Will Teach You To Be Rich is a six-week finance program for individuals between the ages of 20 to 35.
However, the steps he discussed with NBC 10 Philadelphia on how college graduates will be successful may be simpler for former students to understand.
The first thing a college graduate must do to get started is open their own brokerage account, traditional IRA, Roth IRA, or any other kind of investment account.
In order to do so, the college graduate must provide information such as a driver’s license and a social security number.
Once the account is open, the owner of it can begin depositing money and select what kinds of funds they would like to invest in.
NBC 10 Philadelphia also suggests that the account holder look into setting it up so that their investment account will receive automatic deposits.
The investment will continue to grow and work well for the college graduate that is looking to be financially successful.
Despite Sethi’s suggestion in investing 10 percent of a salary every year, college graduates may not have to start doing that right away.
It’s best for college graduates to begin investing early on so that their money will have longer time to grow through compound interest.
According to Fidelity, compound interest is when interest you earn in a savings or investment account earns interest of its own.
This means that the investment account holder can earn interest on its initial balance and the interest that is added to the total amount of money over time.
An example of this would be if a college graduate was to invest $1,000 and earn an annualized return of 7 percent.
This would result in their investment growing to $1,070 by next year and earn 7 percent of their entire balance the year after that.
If college graduates were to begin contributing $100 toward an investment account that generates a 7 percent annual return rate when they’re 21-years-old, their total could be over $1.4 million by the time they’re 65.
‘By starting at your college graduation with your first job, you will set yourself up for a lifetime of living a rich life,’ said Sethi.