The Power of Saving $100 a Month
***Disclaimer – I’m not a financial advisor, just a normal guy with financial success. The information shared here is purely for educational purposes only***
$100 is not a small amount of money but it’s also not really considered a large sum. Spending money is easy; most of us can spend $100 without blinking an eye. But what happens over time if you’re able to put away $100 in retirement each month? Today we want to take a look at what saving just $100 a month (or a little more than $3 a day) can do for your financial health in the long run.
$100 a month for 10 years
Let’s assume you’re investing $100 a month into an investment / retirement account and you are getting an average of 8% return a year, what would your investment look like in 10 years? Contributing $100 a month equates to $1,200 a year and $12,000 in contribution to your investment account, it results in around $18,000 total by the end of the 10 years. Not too bad, but hardly ideal for retirement. How much you need in retirement of course comes down to your lifestyle or what your goals are. But wait, money takes time to grow; time is the other essential ingredient to long term investing.
$100 a month after 20 years
So what happens if you invest $100 a month for 20 years at 8% return each year? How about your money triple to almost $57,000 in just 10 more years? Your total contribution at this point is $24,000 and interest is close to $33,000. So the longer you invest, the greater your interest will be and eventually it will be much greater than your initial contributions, keep staying the course and put money away each month.
$100 a month after 30 years
So what happens if you are faithful in putting away $100 a month for 30 years now? The money doesn’t quite triple this time but not too far off either. Your total investment would jump to over $140,000 at this point. $36,000 would be your contribution and over $104,000 would be interest from the annual 8% gains. So at this point, your interest is almost 3 times as much as your contribution.
$100 a month after 40 years
If you are able to contribute $100 for 40 years, you’ve done a solid job sticking to your plan. At this point, your investment would be worth an estimated $322,000. $48,000 is your total contribution and $274,000 is the interest. If you started around your early 20s and put away $100 a month, you would be nearing retirement age at this point.
Frankly speaking, $300k or so isn’t quite enough for retirement in 2022. But if you have no major expenses and you live somewhat frugally with social security supplementing your income, you just might make it with around $300k in retirement savings. Hopefully you did a great job paying off your car and your house so you can cut down your monthly expenses as you are nearing retirement in your late 50s or early 60s.
$100 a month after 45 years
If you are able to work for 5 more years and continue to contribute $100 a month, you would have around $480k at this point, $54,000 being the total contribution and more than $426K in interest. Similar to the last point, $480k is a sizable amount of money, but you would still have to be careful with how you spend this money in retirement.
The good news at retiring at 67 is that you get the full benefit of social security. The bad news is, if you’re not retiring in the next few years, social security could run out of money or has to give reduced benefits in the future. For the younger generations and people who are retiring in the next 15 years like me, it’s best not to rely too heavily on the social security checks.
$100 a month after 50 years
If you are still working at this point and have worked for 50 years, you would be around 71 or 72 years of age at this point. You would have around $710k in total investment after 50 years, $60,000 in total contributions and $653k in interests. At this point, your interest is more than 10 times your total contribution. The longer you wait; the interest you gain each year is greater.
Some financial advisor recommends withdrawing around 4% a year to make your money last for around 30 years in retirement. With social security benefit and carefully managed account of $710k, this gives you a good chance of surviving retirement and makes your money outlast your life, there’s even a chance that you may be able to leave some money for your children or grandchildren.
$100 a month after 55 years
Most of us probably won’t and don’t want to work for money for 55 years that would take us close to our 80s, but for the sake of seeing the power of saving $100 a month over time, let’s see what our total investment would be.
Our total at this point at 8% annual return would be around $1.05 million dollars. You would be 76 or 77 years old at this point if you started working at 21 or 22, so hopefully you still have a few good years left to enjoy the fruit of your labor.
In Conclusion
So $100 is not a ton of money. Practically anyone can save this much money each month. If you develop a saver’s mentality and continue to do this every month, you won’t have to worry yourself too much with your finances in the later part of your life.
Hopefully you are able to save more than $100 a month throughout the course of your working life. Imagine if you are able to save $200 a month or even just $150 a month for 40 years, your retirement fund would be significantly higher than what was we came up with, happy saving and investing.
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***Disclaimer – I’m not a…