While the headlines have been dominated by a rollercoaster in the stock market, financial guru Dave Ramsey isn’t going doom and gloom.

In fact, the radio host believes every young North American has a shot at becoming a millionaire.

“If you’re under 40 years old and you don’t retire a millionaire, that’s no one’s fault but yours,” the 64-year-old said on X, formerly known as Twitter..

Here’s a closer look at the math behind his exhortation.

Everyone can be a millionaire

Despite the economic challenges facing young Canadians, Ramsey believes that the average 25-year-old needs to save just a fraction of their annual income to retire at 65 with over $1 million.

However, his thesis assumes that this 25-year-old invests in “good growth stock mutual funds.” According to his calculations, diligently investing just $100 a month into such growth funds could create a $1,176,000 nest egg within 40 years.

Ramsey doesn’t mention any specific growth funds, but his calculations imply a roughly 12.85% annual growth rate.

For example, the Vanguard S&P 500 ETF (TSX: VFV) has delivered a compounded annual growth rate of 16.93% since its inception in 2012.

In fact, the S&P 500 has delivered an average annual return of 10.13% since 1957, according to Investopedia.

Given the long-term performance of these index funds, Ramsey’s assumption doesn’t seem unreasonable, even when you take into account the recent volatility in the stock market in response to U.S. President Donald Trump’s tariff announcements. There have been many shocks, dips, corrections and outright crashes in the past 100 years, and the market has always eventually bounced back.

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Ramsey’s path to $11.6 million

The four variables of the compound growth calculation are time, initial investment, regular investment and growth rate. Of these, the only variable you can somewhat control is regular investment.

Investing $200 or $300 a month could help you create a nest egg significantly bigger than just $1 million. Ramsey recommends setting the bar even higher at 15% of gross annual income.

“The average household income in America today is US$79,000. If you invested 15% of that (US$11,850 a year), you would retire with around US$11.6 million,” he said on X.

The average household income for Canadians is C$70,500. Following Ramsey’s rule, you would need to invest C$10,575 per year to maximize your retirement fund.

However, most Canadians are saving significantly less than Ramsey’s target. In the third quarter of 2024, the average household savings rate in Canada was 6.10%, down from 7.30% in the third quarter of 2024. The rising cost of living, stagnant wage growth and debt servicing costs are barriers most families face regardless of age.

One common financial mistake is keeping your money in low-interest savings accounts. High-yield savings accounts can offer returns up to 10 times higher than those from traditional banks, according to NBC Select and Dynata Banking Behaviors.

If you’re looking for the best bank for your savings, you can open a high-interest savings account with Simplii Financial and earn 4.25% APY on eligible deposits for the first four months. Plus, Simplii Financial charges no account, monthly, or transaction fees.

Unlike Guaranteed Investment Certificates (GICs), you can access and withdraw funds anytime you want from your Simplii Financial account.

Leveling up your investments

Amid the ongoing market volatility and escalating tensions between the U.S. and Canada, it’s crucial to protect your portfolio against risks.

Diversifying your investments across multiple asset classes — such as stocks, bonds and ETFs — can help you significantly hedge against market risk.

Opening a discount brokerage account with CIBC Investor’s Edge can help you diversify your portfolio without having to pay exorbitant commissions on trades.

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CIBC Investor’s Edge charges a discounted commission rate of C$4.95 per trade for active traders making over 150 trades in a quarter.

If you open your CIBC Investor’s Edge account before Sept. 30, you can get up to 100 free equity trades and over $200 in cash back.

Other paths to become a millionaire

Homeownership can be a key stepping stone to reaching millionaire status by retirement. Once you’ve decided on the kind of house you want to purchase, shop around and compare mortgage rates offered by reputable lenders near you through Loans Canada.

Here’s how it works: Select the kind of loan you want to get and submit an application, and Loans Canada will sort through its network and display the best possible offers for you.

Those who want to refinance their existing mortgage can compare refinancing rates offered by leading lenders through Loans Canada.

Refinancing your home loan through Loans Canada could help you pay off your mortgage early in two ways. By securing a lower interest rate, you can either maintain your current monthly payment while more of it goes toward the principal, or you can opt for a shorter loan term to accelerate your path to homeownership.

The best part? You can apply for a mortgage or refinance loans even with poor credit — and it’s 100% free.

Sources

1. X:@daveramsey

2. Investopedia:S&P 500 Average Returns and Historical Performance (Dec 26, 2024)

3. Statistics Canada:Quality of life Indicator

4. Trading Economics:Canada Household Savings Rate

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.