Save a Little Bit a Day and Become Rich

I recently found this article from David Bach on how to save money (primarily for retirement) and really appreciated his insight here:

Learning to save is a lot like running a marathon -- you need to build up to it by training gradually. It's too overwhelming to go from saving nothing to saving $2,700 a month, so you need to start slowly and keep it simple.

Consequently, I asked Harriet if she could save $10 a day. She felt that was totally doable -- I even got her to agree that she could get her husband to save $10 a day. That adds up to be $7,300 a year.

If Harriet paid herself that $7,300 and put it in a solid, diversified investment that earns 10 percent (less than the stock market has averaged since 1926), she would have $461,947 in 20 years

It also turns out that Harriet's employer offers a 401(k) plan that matches 50 percent of what each employee contributes. That $20 a day she saves plus the 50 percent match equals $30 a day, which adds up to $10,950 a year -- which, at a 10 percent annual return for 20 years, would give Harriet a grand total of $692,924.

The point I love about these thoughts is that even if you can only save a little each day, it will add up to a large sum if you do it for years and years. That's why it's sooooooooo important to start saving early -- even if it's only $1 a day -- it will add up to a fortune over time. So if you start at 22 when you get out of school and earn 8% on your investments, here's what you'll have at age 62 at the following savings levels:

• Saving $1 per day turns into $94,556
• Saving $5 per day turns into $472,778
• Saving $10 per day turns into $945,556
• Saving $20 per day turns into $1,891,113

Now for most of us, it's too late to get 40 years of savings (unless we started 20 years ago) but this is certainly a reasonable amount of savings time for your kids. Teach them the power of saving over time and when they hit retirement, they'll thank you again and again.

Comments

[Lazy Man and Money]

Saving $10 a day would be a fortune the way I live currently. Most days, I don't spend a dollar more than my necessary expenses (transportation, rent, insurance, etc.)

I guess to some people that would be saving a little, but it really depends how frugal you currently are to begin with.

[plonkee]

I agree that $10 a day is actually quite a lot of money. But on the other hand anything saved is better than nothing.

[Rob D.]

Right. Forget the $10. The trick is just to get started and develop a good habit. As you begin to make more money saving becomes as natural as brushing your teeth every morning.

[Anonymous]

Okay, what if someone makes 1300 a month and therent is 809.14 a month then what? Everything they try never makes money, not even to solve a case!

[Anitra]

Anonymous: Have you thought of anything that could reduce your rent or increase your income? You could move to somewhere cheaper, or take in roommates.

Dont waste your money on alcohol drink and cig't smoking..SAVE ALOT OF MONEY.