You'll often hear that if you want to grow a lot of wealth over time, then it's important to put your money to work by investing it. But actually parting with money to invest is a different story.
You may want to invest a few hundred dollars a month so you can grow yourself a nice little fortune. But finding that few hundred dollars is easier said than done when your car needs maintenance, the rent is due, and you're out of groceries and need to restock.
It can be especially difficult to find money to invest with when investing is something you're not used to doing. But the good news is that most brokerage accounts don't impose a minimum for opening an account, and many allow you to invest on a fractional basis. This means that if you only have $5 to invest with, you can still buy a portion of a share of stock if a full share costs $100 or more.
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Now you may be thinking, "Well heck, I'm not going to get very far by investing $5." And you're probably right. A single $5 investment is not going to do a whole lot for you.
But what if you were to carve out $5 a day by making small changes -- doing things like skipping your morning store-bought coffee or being more frugal at the supermarket? You may be surprised at what an impact that has over a lengthy period of time.
Small investments could go a long way
Over the past 50 years, the stock market has averaged an annual 10% return (before inflation), as measured by the S&P 500's performance. That doesn't guarantee that your stock portfolio will deliver that same exact return. Your money might grow at a slower pace, or you might do better than 10%. But given that data, it's fair to assume that your portfolio has the potential to generate an average yearly 10% return if you're investing in stocks over a longer period of time.
So, let's say you're able to invest $5 a day over a 40-year period. At an average annual 10% return, you're looking at accumulating about $797,000 -- and you'll have only put in $72,000 of your own money over that 40-year stretch. That could serve as a very nice nest egg for retirement.
But let's be conservative and say you'll only score a 7% yearly return in your portfolio over time. In that case, you'd still be looking at around $359,000 -- not too shabby. And if your portfolio does better than the market's average and you score a 12% annual return, you'll be sitting on $1.38 million.
You don't need to invest a ton of money to produce great results
They say it takes money to make money, and that's fair. You can't invest if you don't put some money into stocks or other assets.
But it doesn't necessarily take a lot of money to invest and do well, especially if you have a longer window of time. So if the idea of building a nest egg seems overwhelming to you, break it down to a number you can wrap your head around -- $5.
And if you can't swing $5 a day right now, start with $1 a day, or $2. You can always ramp up as your earnings increase. But the key is to give yourself as much time as possible to invest and build wealth.
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FAQs
So, let's say you're able to invest $5 a day over a 40-year period. At an average annual 10% return, you're looking at accumulating about $797,000 -- and you'll have only put in $72,000 of your own money over that 40-year stretch. That could serve as a very nice nest egg for retirement.
How much is $5 dollars a day for 40 years? ›
If you just saved $5/day for forty years – no interest – you'd only have $73,000.
How much money will I have if I save 5 dollars a day? ›
Saving $5 per day
By setting aside just $5 per day (or around $150 per month) and investing it at a 6% return, your savings would grow to: After 10 years: $23,725. After 20 years: $66,214. After 30 years: $142,304.
Is saving $5 a day good? ›
Daily saving of $5, or approximately $150 a month, is a wise approach to building retirement savings. By consistently saving $5 a day, you'll have $1,825 in a year. With an average 7% annual return and the magic of compound interest, this amount could grow to over $2,500 in five years and more than $4,600 in a decade.
Is $5 a good investment? ›
Is Investing Just $5 Worth It? Obviously if you're saving for retirement, you'll need to invest a lot more than $5 on a regular basis. A good rule of thumb is to save around 15% of your pre-tax income in a retirement account, like a 401(k) or individual retirement account (IRA).
What if I save $100 dollars a month for 40 years? ›
According to Ramsey's tweet, investing $100 per month for 40 years gives you an account value of $1,176,000. Ramsey's assumptions include a 12% annual rate of return, which some critics have labeled as optimistic given that the long-term average annual return of the S&P 500 index is closer to 10%.
How much is $25 dollars a week for 40 years? ›
If you invest $25 per week, you'll end up saving $1,300 every year. Over a decade, you'll stash away $13,000. Over a 40-year time frame, the sum adds up to $52,000. Here's the catch: over those periods, your contributions will also be earning interest.
How much is $5 a day for 30 years? ›
Many young people worry more about paying off their debt than investing, but waiting until you're out of debt to invest can make it harder to realize your goals. Investing just $5 a day into an account with a 10% annual return could net you around $30,000 in 10 years, $330,000 in 30 years and $2.3 million in 50 years.
What is the 365 day money challenge? ›
If you want to start smaller, consider the 365-day penny challenge. For this challenge, you'll need a big jar and a whole lot of pennies. You'll put one penny in the jar on Day 1, two pennies on Day 2, and so on until you're putting 365 pennies on the last day of the year.
What happens if you save $1 dollar a day? ›
The answer to that question depends on interest rates or rates of return. With no interest involved, putting one dollar a day into a bank account (or a jar at home) will see you end up with $365 in a year. Multiply that amount by 30 years and you'll end up with $10,950. Now let's factor in an interest rate of just 1%.
Depending on your strategy, saving $1 a day can add up to $18,000 — or $23,600. A dollar doesn't go as far as it used to — or does it? It's true that you can't get much for $1 these days. But if you set aside $1 each day, you actually can get a lot of bang for your buck.
How much will I have if I save $10 dollars a day for a year? ›
How much of a difference could investing $10 a day make? Investing $10 a day can have a huge impact on your financial future because it has a snowball impact. The $10 a day adds up to $3,650 a year -- which is a pretty good sum of money. And, once you have invested that money, you get to benefit from compound growth.
What is $5 a day about? ›
How much is $5 a week for a year? ›
$5 weekly is how much per year? If you make $5 per week, your Yearly salary would be $260.
How much is $5 dollars a day in a year? ›
By saving just $5 a day, you'll have around $150 more in your monthly budget. Sock it away for a year, and a little more than $1,800 would be at your disposal. Consider these 10 easy ways to save $5 each day.
How much is 5.00 a day for a year? ›
Five dollars a day amounts to about $150 per month or $1,825 per year.
