Growing up I always heard from parents and teachers that a penny saved is a penny earned. However, since it has become such a common phrase it has lost much of its meaning. The phrase in all its generality means that continually saving your money leads to more money in the bank. So let's break this down a bit by using a number we all strive for... $1,000,000.
So how do you save a $1,000,000 by saving pennies? Well if you were to collect pennies everyday and invest them starting at 20 years old you would have to find around 1,200 a day to have a million by retirement. Having said that, let's be a bit more practical by following the chart and the break down below. Let's assume you receive a hypothetical return of 6% and you decide to retire at 65.
- Save $360/ month starting at 20 years old
- Save $500/ month starting at 25 years old
- Save $700/ month starting at 30 years old
- Save $990/ month starting at 35 years old
Not too bad right? But let's see what happens if you wait too long...
- Save $3,421/ month starting at 50 years old
- Save $6,071/ month starting at 55 years old
- Save $14,261/ month starting at 60 years old
So if you want to have a million in the bank by age 65 start saving up those Pennies!
*Amounts were based on a retirement age of 65 and a hypothetical return of 6%. This example is hypothetical only, and does not represent the actual performance of any particular investments. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested.