Suze Orman says Gen Z, millennials can eventually have 'more money than you ever dreamt possible' by doing one simple thing — but they have to start now

“You want to play and have fun, that's on you later on in life when you can't pay your bills,” she told Moneywise in a May 16 interview.

“You start right now in making your money grow and you’ll have more money than you ever dreamt possible.”

Orman has some advice for young Americans that could add hundreds of thousands of dollars to their bank accounts over time.

Time is on your side

A common complaint among younger generations is that they’re financially worse off than their parents.

This is because millennial and Gen Z Americans are saddled with student debt, they can’t afford real estate, and their cost of living has increased dramatically.

But it's not all bad news.

“Their priority is their youth, their priority is time,” Orman says. “If there's anything the younger generation needs to understand, it’s that the key ingredient to any financial freedom recipe is compounding.”

She explains how $100 a month can grow into a huge pile of money over a long period of time.

If you start saving $100 every month from the ages of 25 to 65, you would stash away $48,000 ($1,200 x 40 years = $48,000) — and that total would grow depending on the APY the bank offers, your balance and how often your interest compounds.

But if you put that money into a Roth individual retirement account (IRA) — as Orman suggests — and you invest (and reinvest) your savings to benefit from compound growth, you can make a lot more money.

“With a 12% annual average rate of return — the markets can do that for you — you’d have a million dollars,” she explains.

Most banks and brokerage firms offer Roth IRAs and they’re easy to open. Your contributions are taxed upfront so that your withdrawals are tax-free in retirement — and you can invest your money in many ways, including in stocks, bonds, ETFs and mutual funds.

In 2023, the maximum amount you can contribute to a Roth IRA is $6,500 (or $7,500 if you're age 50 or older).

There are certain rules and limitations tied to Roth IRAs. For instance, if your income is too high — over $153,000 for single filers or $228,000 for married or joint filers — you cannot contribute at all.

But for young people at the start of their careers who may not have that higher salary yet, this can be a solid saving option.

Read more: Here's the annual income you need to fall in America's lower, middle, and upper class — plus 3 simple tips to boost you up the ladder

Change your mindset

It can be hard for young people to understand why it’s important to save for retirement when they are most likely decades away from that stage of their life.

The problem, according to Orman, is that too many Gen Z and millennials think: “I’m still young. I like going out. What difference can $100 a month make?”

If you start saving $100 every month at the age of 35 rather than 25 — with a 12% annual average rate of return — you’d only have $300,000 by the age of 65, Orman explains.

“Those 10 years [would] cost you $700,000,” she says.

While a 12% annual average rate of return may seem far-fetched, Orman says it could even be conservative.

The financial guru says you could earn up to a 25% rate of return on your money by making the most of employer matches in tax-friendly retirement savings vehicles like 401(k)s, IRAs and emergency savings accounts.