Young Investors: Create Stable Cash Flow and Save for Retirement Now!

Young investors may not have cash on hand to invest, so get some with this method, along with future reinvesting in passive-income stocks.

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Path to retirement

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Young investors certainly have time on their hands when it comes to preparing for retirement. But that doesn’t mean they necessarily have the cash to invest — especially this year, with economy not doing quite well, and salaries simply unable to cover the cost of purchasing items. Even basics like groceries have become difficult to purchase.

So, let’s solve these problems today. Let’s get young investors actually investing, creating stable cash flow that can help you on your goal to retirement — starting right now.

Start creating passive income

In this instance, when I say “passive income,” I don’t actually mean passive income through investing. Not yet at least. Instead, I’m referring to passive income you can create that will last you your whole life. This means getting into habits of creating cash flow that you can do no matter what and that won’t affect your day job.

But passive income means you’re not doing work. So, this isn’t a part-time job, a passion project, or anything like that. You need to make money by doing nothing. The best way to do this is to rent out items you already have.

This can be anything, and, if you live in an urban environment, it can be quite easy. It might be something like renting out a parking space or apartment storage unit, or even household tools. Just make sure you have a contract set up with a financial advisor and proof of identification on hand, such as a driver’s license.

This type of passive income can be so easy, and you can do this for life! On average, you could make as much as $300 per month or more. That’s $3,600 to invest in your retirement every year.

Invest in passive-income stocks

Young investors should then move to the next step of investing that passive income. You’ll need stable dividend investments that will produce regular passive income as well. You can then use this cash to reinvest in your dividend stock, creating higher and higher savings as you go.

A great option would be iShares Canadian Financial Monthly Income ETF (TSX:FIE). It currently holds a 7.19% dividend yield, and, as the name suggests, hands out a monthly dividend payout. Here is what you could get right now with a $3,600 investment.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDEND (ANNUAL)TOTAL PAYOUT (ANNUAL)FREQUENCY
FIE$6.68539$0.48$258.73Monthly

Now make it work for you

Let’s say you continue adding $3,600 each year to your investments, reinvesting the passive income as you go. You do this on a monthly basis through automated contributions. What’s more, you see shares rise as well. For FIE stock, it holds a compound annual growth rate of about 3.5% in the last decade, with a dividend that’s remained stable the last decade.

Here’s what could happen then if you held and reinvested in this dividend stock for the next 30 years.

Shares OwnedAnnual DividendAfter DRIP ValueYear End Shares OwnedYear End Stock PriceNew Balance
539.00$258.73$3,867.951098.38$6.91$7,593.97
1098.38$527.25$8,138.321677.54$7.16$12,004.11
1677.54$805.26$12,834.602275.75$7.41$16,854.74
2275.75$1,092.42$17,980.202892.21$7.67$22,170.11
2892.21$1,388.33$23,599.003526.07$7.93$27,974.95
3526.07$1,692.60$29,715.294176.43$8.21$34,294.41
4176.43$2,004.79$36,353.804842.33$8.50$41,154.10
4842.33$2,324.44$43,539.675522.79$8.80$48,580.06
5522.79$2,651.08$51,298.466216.81$9.10$56,598.76
6216.81$2,984.22$59,656.176923.33$9.42$65,237.12
6923.33$3,323.37$68,639.207641.30$9.75$74,522.50
7641.30$3,668.01$78,274.408369.65$10.09$84,482.69
8369.65$4,017.64$88,589.069107.29$10.45$95,145.95
9107.29$4,371.73$99,610.939853.16$10.81$106,541.04
9853.16$4,729.76$111,368.2410606.17$11.19$118,697.17
10606.17$5,091.23$123,889.6911365.26$11.58$131,644.09
11365.26$5,455.61$137,204.5212129.36$11.99$145,412.07
12129.36$5,822.40$151,342.5112897.45$12.41$160,031.93
12897.45$6,191.10$166,334.0013668.50$12.84$175,535.11
13668.50$6,561.22$182,209.9114441.52$13.29$191,953.64
14441.52$6,932.29$199,001.8415215.54$13.76$209,320.21
15215.54$7,303.84$216,742.0015989.62$14.24$227,668.20
15989.62$7,675.42$235,463.3416762.86$14.74$247,031.72
16762.86$8,046.59$255,199.5417534.39$15.25$267,445.65
17534.39$8,416.94$275,985.0718303.37$15.79$288,945.67
18303.37$8,786.07$297,855.2319068.99$16.34$311,568.32
19068.99$9,153.59$320,846.1819830.51$16.91$335,351.07
19830.51$9,519.13$344,995.0320587.18$17.50$360,332.32
20587.18$9,882.36$370,339.8521338.35$18.12$386,551.49
21338.35$10,242.93$396,919.7422083.34$18.75$414,049.04

Young investors could then have over $414,000 in savings from this investment for retirement and any emergency along the way.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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