When it comes to retirement savings, millennials are getting a lot of things right.

As a group, almost 60% of them are already saving for retirement—and they started when they were 25. Almost 40% of them already know how much money they’ll need when they retire. They also know how old they’ll be when they reach that milestone. With a strong and early start, millennials have a great chance of reaching their retirement dreams.

You’d think millennials are doing everything right. And for the most part, they’re on the right track, except for one group: millionaire millennials. They’re making a mistake that is costing them money every day. And you and I can learn from it.

The Big Blunder

According to the World Wealth Report, millennial millionaires are keeping roughly a third of their money in cash or similar equivalents. Apparently, this youngest generation wants the freedom to jump on start-ups like Facebook or Snapchat before they take off—and that can be risky as a single stock!

Unfortunately, other people may be thinking, Wow! What a great idea! If this millionaire is doing this, then maybe I should be keeping more cash on hand too! Um, no. Keeping that much money in a savings account is a bad idea.

Why? Because that money isn’t working for you. It’s sitting idle, doing nothing but collecting dust and making you worry about what new start-up you need to buy in to. Yes, that money is collecting interest if it’s in a bank account, but the amount you earn in a year won’t even keep up with inflation.

The Solution for All of Us

What should you and I be doing with that money? First, you need to make sure you’ve set aside 3–6 months’ worth of living expenses as your emergency fund. Then invest 15% of your household income in investments.

Leave your investments alone and let time and compound interest do the rest of the work. Then, as you get closer to retirement, you will need to work with an investing professional to protect that wealth.

Learn why you need an emergency fund.

Here’s the difference between leaving your money in a savings account versus an investment account:

Savings Account Growth

$100,000 at 0.06% compound interest (the average rate) + 10 years = $600 in growth

Investment Account Growth

$100,000 at 8% compound interest + 10 years = more than $115,000 in growth

That’s the difference between a savings account and an investment account. The numbers speak for themselves.

Think Smarter Than the Media

I get it. The media lifts up these millennial moguls as the role models you should be following, but those stories are the exception, not the rule. The bulk of America’s millionaires didn’t buy a start-up or invent an app. They don’t live in Silicon Valley. In fact, they probably live in your neighborhood.

These quiet wealth-earners worked hard, stayed out of debt, made sacrifices, and kept their eye on the ball. They didn’t get distracted by a flashy “investment opportunity” (which is another way of saying “money scam”). They didn’t give in to the pressure to live up to our culture’s perception of wealth and success. They certainly didn’t keep a third of their money in cash. They understood that building wealth is a marathon, not a sprint.

Those millionaires next door are the real role models. We can all learn a lot from them.

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