Millennials: 3 Reasons Your Money Isn’t as Hopeless as You Think

Millenials are bombarded with bad news about the economy. But by making good investments like RBC stock early, you can have good finances in the future.

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Millennials, you have it tough these days. It’s a lot more challenging to own a house than it was for your parents; schooling has gotten a lot more competitive; and it’s harder to find a job than before.

It’s a stressful time to be a millennial, but here are three reasons things aren’t at hopeless as they seem.

Millennials: You are more open to talking about your money

To learn more about money, it’s better to be open about your finances. While only 9% of baby boomers share financial information with their peers, 30% of millennials do with theirs. That’s almost a third of all millennials. By talking with your friends about money, you can learn tips and share strategies together.

Also, 12% of millennials talk with coworkers and colleagues about money, while only 2% of baby boomers do. By talking with your coworkers about money, this can help you determine if you are leaving money on the table with your salary at work.

Millennial women: You are more likely to outearn your partners

If you’re a millennial woman, you have a much higher chance of earning more than your partner or spouse. 35% of millennial women surveyed reported making more money than their partner, while only 18% of baby boomer women said the same. This is almost twice as high.

While the salary wage gender gap is still a problem, this shows that there has been progress through the recent generations for women’s earning potential.

Millennials: You’re young

Time is the most precious resource of all. Here’s a shocking example of the power of time on your investments:

If you’re a 25-year-old millennial, and you invest $1,000 at a rate of return of 7%, in 20 years, by the time you reach 45, your investment will be worth $3,861. That’s almost four times as much, which is not too bad.

But guess what that same $1,000 investment will be worth after 40 years, at age 65?  It’s a jaw-dropping $14,970, or almost 15 times as much! This example illustrates the power of continuous compounding and the power of saving early in your life.

Applying the power of millennial youth to stocks

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a top stock choice of Canadians. The largest bank in Canada has had a good run since its inception in 1864. With an ATM or branch on every corner of Canada, RBC needs no introduction.

RBC’s dividend policy is to keep the payout ratio to less than 50%. The 3.92% dividend the stock pays today is consistent. The bank’s earnings and cash reserves are more than enough to support dividend payments. As an added benefit, RBC started paying dividends in 1870, and that’s a record of almost 150 years.

Had you invested $1,000 in RBC 20 years ago, it would be worth $13,208 today, with dividends reinvested. This equals to a 13.76% return per year or about 13 times as much.

If you invest $1,000 in RBC for 40 years instead of 20, and annual returns are 13.76%, it would be worth an insane $172,613, or 173 times as much as the initial investment!

Now, these returns are quite high and not guaranteed to repeat for the next 40 years, but I hope you get the idea of how starting to invest young can affect your investment outcomes.

Conclusion

While you might think it’s all doom and gloom for millennials, things aren’t always as bad as they seem. If you start investing early in stellar stocks like RBC, your finances can be in great shape in the future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

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