Kevin O'Leary Says This Savings Rule Could Turn You Into A Millionaire Before Retirement

Canadian venture capitalist and seasoned "Shark Tank" investor Kevin O'Leary is known for dolling out no-holds-barred financial opinions. He's made deals on products all over the spectrum, from pet DNA tests and gym equipment to cryptocurrency and wine, and it's come with plenty of often-strict advice to partners and aspiring entrepreneurs along the way. But while O'Leary has built an entire career out of making bold financial moves, the self-made millionaire tends to keep his tips surprisingly simple when it comes to advising his own family members. In a recent video posted to his social accounts, O'Leary said, "What piece of advice do I give my kids over and over and over again about money? Don't spend it. Save it, invest it, let it compound. That's the gift the market gives you." Specifically, he says to set aside 15% of all earnings (including gifts and any extra cash) for investment.

This might not be O'Leary's secret to earning $1 million fast but a well-worth it payoff over time. O'Leary concludes this advice by noting that the average income in the U.S. is $68,000, so if you do this your whole life, you'll wind up a millionaire by the time you hit retirement at 65. This is in line with the businessman's previous statements over the years, in which he's advocated against "wasting money" on things like fancy coffees and going out for lunch and urged people to save.

Kevin O'Leary's financial tips seem simple enough, but since he's talking about becoming a millionaire here, is it really sound advice? That depends. First, O'Leary's reasoning is based on a supposed average income of $68,000. For simplicity's sake, let's say you earn that over a period of 20 years and put 15% every year in investments. That's $10,200 a year, adding up to $204,000 put away over two decades. JP Morgan Chase has the average market return rate around 10%, so that would be a minimum return of $1,020 annually or $20,400 over two decades. Compounded over time as your balance (and likely, your income) grows, and that could indeed push your assets to over a million.

Still, incomes vary wildly, as does cost of living. Average income also fluctuates between data sets. For example, the Social Security Administration estimates the average salary to be $63,932.64, while SOFi pegs it just slightly higher at $66,672. The Pew Research Center meanwhile shows that the income for middle class U.S. households falls anywhere between $56,600 to $169,800, with social class (lower, middle, and upper) being dictated by income level combined with regional living costs. Individual expenditure needs vary, and not everyone may be able to set aside 15% each year, especially if medical debt or other unexpected costs arise. But if you can comfortably set aside 15% each year, it'd be wise to go ahead and do so, adjusting as needed over time.

If you are setting aside 15% of your income to compound in the market, successfully investing for the future very much depends on what kinds of investments you're actually making. In an interview on YouTube's The Diary of a CEO, Kevin O'Leary stresses that diversifying is key. He recommends not putting more than 20% of one's investments into any one sector, with the exception of real estate (which he says makes up a third of his portfolio). The financial mogul further emphasized the importance of staying away from "big bets" that could fail and ultimately take the bulk of an investor's net worth with it.

And while being a millionaire by age 65 is certainly nothing to complain about, it's also crucial to avoid mistakes that could make your retirement fortune run out while you still have years left. Spending too much, too fast is a big one of course, as is pulling out of your high-growth investments too fast. Last but certainly not least, it's important to realize upfront that investing does not come with any guarantees, even if you opt for historically safe stocks. If you're new to putting your money in the market, be sure to secure these five things first before investing anything to help yourself stay safe.