Alex Rodriguez is one of the highest-paid professional baseball players ever and has earned more than $450.2 million over the course of his career. And he became a millionaire at an age when most people are still in high school.
In 1993, at 17, Rodriguez signed a three-year contract with the Seattle Mariners for $1.3 million plus a $1 million signing bonus. Earning so much at a young age "was a culture shock for me and those around me," Rodriguez told The New York Times Magazine in 2018. "You have a young kid who learned how to play baseball at the Boys & Girls Clubs," A-Rod continued. "Then you climb through the system, you become the No. 1 draft pick. You bypass college. At 21, you get over $10 million in a contract, which is crazy."
Rodriguez went on to sign a 10-year, $252 million contract with the Texas Rangers in 2000. At the time, it was the largest contract in MLB history. The shortstop and third baseman ended his 22-season pro career in 2016 with the New York Yankees.
Rodriguez has a key piece of money advice for his younger self: Plan ahead. "You're going to make probably 90% to 95% of your lifetime income from age 20 to 30, and you have to ask yourself, 'What's going to happen from age 30 to 80?'" he told CNBC Make It earlier this year.
Even if you're not a professional athlete, your future self will thank you if you start saving early. Here's how to set yourself up to save as soon as you start earning.
Thanks to the power of compounding growth, the earlier you start investing, the better. Compounding, which means you'll earn interest on your interest as well as your contributions, really pays off if you start putting money away in your 20s. That's because the dollars you invest initially have much more time to grow until retirement.
"You have an incredible opportunity if you're frugal and you're smart and you put your money away early," Rodriguez tells CNBC Make It. "The ability to have compound interest over 20, 30, 40 years — you can be a very wealthy young person in a very short period of time."
A 25-year-old who invested $5,000 per year until the age of 35, assuming an 8% annual return, would amass around $787,000 by the age of 65. However, someone who started investing $5,000 per year at the age of 35, with the same annual return, would only have around $612,000 at retirement.
By investing early, you're more likely to be on track to meet long-term savings goals. Consider that to retire comfortably, a 25-year-old earning $50,000 today could very well need $1.6 million saved, according to an analysis from Grow.
"In your 20s, you've got to establish your discipline. Otherwise it will haunt you for a lifetime," Janet Stanzak, a certified financial planner and owner of Financial Empowerment in Burnsville, Minnesota, told Grow earlier this year. She suggests you track your finances to know that you're spending wisely on both financial obligations such as rent and utilities and phone bills, and fun and leisure expenditures.
Setting up automatic contributions can make putting money away easier. "Automation is a tool that allows you to get out of your own way," Bola Sokunbi, author and CEO of Clever Girl Finance, told Grow earlier this year. "It eliminates the mental battles you have deciding whether to spend or save."
"Millionaires are made in their 20s and 30s, not their 50s and 60s," Fred Creutzer, president of Creutzer Financial Services in Maryland told Grow earlier this year. "If you wait until you're 50, you're never going to catch someone who started at a young age. When it comes to investing, the early bird always gets the worm."
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