You'll often hear that it's important to save and invest money on a consistent basis. But when you're limited on funds, that's not always an easy thing to do.
These days, many people are having a hard time covering their basic living expenses due to inflation. So the idea of carving out thousands of dollars a year to pump into your brokerage account may, frankly, be out of the question.
But here's the good news. You don't actually have to invest a ton of money on a monthly basis to build up a lot of wealth over time. In fact, you can do really well for yourself even if you're only investing $100 a month.
It's a matter of how you're investing
A $100 monthly investment over 40 years could leave you more than $500,000 richer -- if you choose the right investments, that is. Over the past 50 years, the stock market has delivered an average annual 10% return (before inflation), as measured by the performance of the S&P 500 index. So if you load up your portfolio with S&P 500 stocks or ETFs, then there's a good chance your portfolio will deliver a similar return.
In that case, investing $100 a month over 40 years will leave you with an ending balance of around $531,000. Meanwhile, you'll only be contributing a total of $48,000 to get to that point. So all told, you're looking at a $483,000 gain, which is pretty impressive.
But to be clear, this sort of gain generally won't be possible if you play it too safe in your portfolio and stick to more conservative assets, like bonds. In fact, let's say a bond-heavy portfolio gives you a 5% average annual return over time, which is pretty generous since, in reality, you're probably looking at a bit less. In that case, investing $100 a month over 40 years will leave you with roughly $145,000. That's only a $97,000 gain.
Stocks are worth the risk in the long run
Some people are hesitant to invest in stocks because they tend to be a lot more volatile than bonds. And that's understandable.
But one thing you should know is that if you don't invest in stocks, you run a different risk -- winding up with a lot less money at the end of your savings window. In fact, let's say you're investing that $100 a month over 40 years for your retirement. A $145,000 nest egg may not go very far, whereas a $531,000 nest egg could make it so you're able to cover your expenses and live comfortably without financial worries.
If you're truly scared to put your money into stocks, consider adding S&P 500 ETFs to your portfolio. This way, you're investing in the broad market rather than taking a chance on a few individual companies.
Plus, this option allows you to build a portfolio that's instantly diversified. And diversification is an important part of growing wealth while minimizing losses along the way.
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FAQs
Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years.
How much is $100 a month invested for 40 years? ›
If you're age 25 and have 40 years to save until retirement, depositing $100 a month into a savings account earning the current average U.S. interest rate of 0.42% APY would get you to just $52,367 in retirement savings — not great.
Is $100 a month good for retirement? ›
It might seem like $100 a month isn't a lot, but it can add up over time. You can also split it into smaller amounts and use it on multiple things, especially if those things don't cost much individually. “We advise diversifying $100 monthly in retirement,” said Adam Garcia, the owner of The Stock Dork.
How much will I have if I invest 200 a month for 30 years? ›
If you were to invest $200 per month over the course of the next 30 years, that would equate to a total investment of $72,000. That's significant, but it's through the effects of compounding that would get your portfolio to a more than $1 million valuation.
How much money will I have if I invest 500 a month for 30 years? ›
What happens when you invest $500 a month
| Rate of return | 10 years | 30 years |
|---|
| 4% | $72,000 | $336,500 |
| 6% | $79,000 | $474,300 |
| 8% | $86,900 | $679,700 |
| 10% | $95,600 | $987,000 |
Nov 15, 2023
Investing $1,000 a month for 20 years would leave you with around $687,306. The specific amount you end up with depends on your returns -- the S&P 500 has averaged 10% returns over the last 50 years. The more you invest (and the earlier), the more you can take advantage of compound growth.
How much money will I have if I save 100 a month for 20 years? ›
How $100 a month can help make you wealthy
| If you invest $100 a month for this many years... | ...this is how much you'll end up with. |
|---|
| 15 | $41,939.68 |
| 20 | $75,603.00 |
| 25 | $129,818.12 |
| 30 | $217,132.11 |
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Becoming a Millionaire by Investing $100 Per Month
According to Ramsey's tweet, investing $100 per month for 40 years gives you an account value of $1,176,000.
How much will I have if I invest $200 a month for 40 years? ›
Many retirement planners suggest using a more modest annual return of 6% when forecasting the long-term performance of a portfolio. At 6%, after 20 years the $200-a-month portfolio would be worth $93,070. After 40 years earning the same return, your model portfolio would be up to about $398,000.
Can you live on $3,000 a month in retirement? ›
That means that even if you're not one of those lucky few who have $1 million or more socked away, you can still retire well, so long as you keep your monthly budget under $3,000 a month.
Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100. If you make a monthly investment of $200, your 30-year yield will be close to $400,000.
What will $10 000 be worth in 30 years? ›
Over the years, that money can really add up: If you kept that money in a retirement account over 30 years and earned that average 6% return, for example, your $10,000 would grow to more than $57,000. In reality, investment returns will vary year to year and even day to day.
How much should I invest a month to become a millionaire in 10 years? ›
Now, let's consider how our calculations change if the time horizon is 10 years. If you are starting from scratch, you will need to invest about $4,757 at the end of every month for 10 years. Suppose you already have $100,000. Then you will only need $3,390 at the end of every month to become a millionaire in 10 years.
How much is $1,000 a month for 30 years? ›
If you put $1,000 into investments every month for 30 years, you can probably anticipate having more than $1 million by the end, assuming a 6% annual rate of return and few surprises.
How many years it will take you to double your money if you invest $500 at an interest rate of 8% per year? ›
For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.
How much to invest per month to become a millionaire in 5 years? ›
Let's say you want to become a millionaire in five years. If you're starting from scratch, online millionaire calculators (which return a variety of results given the same inputs) estimate that you'll need to save anywhere from $13,000 to $15,500 a month and invest it wisely enough to earn an average of 10% a year.
What if I invest $100 a month for 20 years? ›
For simplicity's sake, assume that compounding takes place once a year. After 20 years, you will have paid 20 x 12 x $100 = $24,000 into the fund. However, the compounding return will more than double your investment.
How much is $500 a month invested for 40 years? ›
If you can consistently invest $500 per month for 40 years, you'll end up with a dividend income stream worth $52,731 based on the fund's current yield.
How much will $1,000 invested be worth in 20 years? ›
As you will see, the future value of $1,000 over 20 years can range from $1,485.95 to $190,049.64.
| Discount Rate | Present Value | Future Value |
|---|
| 5% | $1,000 | $2,653.30 |
| 6% | $1,000 | $3,207.14 |
| 7% | $1,000 | $3,869.68 |
| 8% | $1,000 | $4,660.96 |
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