Building Wealth: The Importance of Having Assets

Wealth-building is a crucial aspect of achieving financial independence and security and assets play a pivotal role in this process.  For young adults especially, understanding the importance of accumulating assets is essential for long-term financial success. This article explores what assets are, why they matter, and how they can help build wealth.

What Are Assets?

Assets are resources with economic value that an individual owns, which can provide future benefits. They come in various forms, including:

  1. Cash and Cash Equivalents: Savings accounts, money market funds.
  2. Investments: Stocks, bonds, mutual funds, ETFs.
  3. Real Estate: Property ownership, both residential and commercial.
  4. Personal Property: Cars, jewelry, collectibles.
  5. Businesses: Ownership in a business or intellectual property.

Why Assets Matter

Assets are critical for several reasons:

  1. Income Generation: Assets like stocks, bonds, and real estate can generate passive income through dividends, interest, and rental income.
  2. Financial Security: Having assets provides a safety net during emergencies, reducing the reliance on debt.
  3. Wealth Appreciation: Assets can appreciate in value over time, increasing your net worth.
  4. Inflation Hedge: Certain assets, such as real estate and gold, can protect against inflation by maintaining or increasing their value.

The Power of Compound Interest

One of the most compelling reasons to start building assets early is the power of compound interest. Compound interest is the interest on interest, and it can significantly increase the value of your investments over time.

For example, if you invest $1,000 at an annual interest rate of 7%, and add no additional money, it will grow as follows:

Year Amount ($)
1 1,070
5 1,403
10 1,967
20 3,870
30 7,612

As shown, the initial $1,000 investment nearly quadruples in 20 years and grows more than sevenfold in 30 years due to compound interest.

Types of Assets and Their Returns

Different assets offer varying levels of risk and return. Here’s a look at some common asset classes and their long-term average annual return range:

Asset Class Average Annual Return (%) Risk Level
Savings Accounts 0.5-5 Low
Bonds 3-5 Medium
Gold 3-8 Medium
Real Estate 8-12 Medium-High
Stocks 8-10 High
Crypto* 60+ Very High

*Cryptocurrencies (e.g., Bitcoin) are a relatively new asset class that has only been around for less than 15 years.

Real-Life Examples

Let’s consider two hypothetical young adults, Alice and Bob, both 25 years old. Alice starts investing $200 monthly in a diversified stock portfolio with an average return of 8% per year. Bob decides to spend his extra money and doesn’t start investing until he’s 35, at which point he invests $400 monthly.

Year Alice’s Investment ($) Bob’s Investment ($)
30 282,977 107,822
40 703,000 352,000

By the time they reach 65, Alice, who started earlier with less monthly investment, ends up with significantly more wealth than Bob.

Steps to Start Building Assets

  1. Educate Yourself: Understanding financial markets and investment strategies is crucial.
  2. Set Financial Goals: Determine what you want to achieve and by when.
  3. Budget and Save: Allocate a portion of your income to savings and investments.
  4. Diversify: Spread your investments across different asset classes to minimize risk.
  5. Monitor and Adjust: Regularly review your portfolio and make adjustments as needed.


Building wealth through asset accumulation is a journey that requires time, patience, and discipline. By starting early, leveraging compound interest, and making informed investment choices, young adults can pave the way to financial independence and security. Remember, the key is to start now and let your assets grow over time.

Image by Freepik 

A Journey to Personal Financial Success

At Morgan Franklin Foundation (MFF), we support the concept of financial freedom – by teaching participants how to save by paying themselves first, invest for their future and grow their net worth.

Learning how money works and how to talk about money with others are the first steps towards recognizing an individual’s lifelong financial goals. Our online programs, podcasts, blogs, and book reviews and resources are designed to help you learn the concepts, rules and vocabulary of money, finance and investing.

Becoming an MFF Fellow

Our Standards of Financial LiteracyLearning about money series is engaging, full of interesting information, and easy to navigate. Adapted from the National Standards for Personal Financial Education developed by the Council for Economic Education (CEE), this robust curriculum features six short lessons on such important topics as earning income, understanding the value of saving and using credit. When completed, this program lays the foundation for becoming an MFF Fellow.

Becoming an MFF Fellow is the ticket to access additional MFF programs and opportunities for mentoring, networking, internships and real-world opportunities. Hear from the MFF Fellow themselves on how these opportunities encourage them to continue their journey to personal financial success.

Learn More about Money

Begin the journey towards personal financial independence today. START LEARNING TODAY

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