How much can you save if you put off $ 1 for a lifetime?

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Depending on the strategy you choose and save $ 1 per day, you can save from $ 18 000 to $ 700 000. It’s true that not many things can be bought at $ 1 today, but if you save $ 1 every day, you can save a significant amount. Below we describe three strategies, using which you can turn $ 1 into a decent capital.

1. Interest-free savings

2. Saving money to a savings account with an 1% rate

3. Investing in an exchange traded fund that tracks an index Standard & Poor's 500.

Strategies are described on the assumption of a $ 1 delay for the 50-year period from 18 to 68 years.

Interest-free savings

Here the calculation is very simple. If you start putting off $ 18 in 1 years, then by 50 years you will have $ 18 250. This amount is not enough to live comfortably in retirement, but if you lead a modest lifestyle and your mortgage is repaid, this amount will be enough to live 1 a year after retirement. Or you can spend this amount on an interesting journey.

Saving money to a savings account with an 1% rate

According to the Federal Deposit Insurance Corporation (FDIC), the average exchange rate market is 0,85% for account balances less than $ 100 000, and the average savings account rate is even lower by 0,06%. However, there are banks that offer a rate of about 1%, for example, Ally bank (1,00% APY for savings, 0,85% APY for foreign exchange markets), Barclays (1,00% APY for online savings) and Synchrony Bank (1,05%).

Thus, if you spend $ 18 per day on a savings account with a 1% rate from 1 years, by the 50 years you will have an amount equal to $ 23 646. Note that in many 1% banks the rate is not charged immediately, but only after a certain amount has been accumulated or when the minimum deposit amount set by the bank is opened. Note that the banks Ally и Barclays do not require a minimum deposit to open an online account.

Additionally, interest rates may rise, causing your savings to rise accordingly. At a 2% rate you will accumulate $31, at 178% - $3.

ETF Exchange Fund

Investing in shares is a rather risky instrument, but the return on deposits is much higher than in the described schemes. If you invest $18 in ETFs from age 1, you'll have $50 in savings by age 698, assuming an annual return of 450% (the average annual return for the S&P 11,23 from 500 to 1965). year). This amount assumes that you start investing from day one and that there are no fund fees.

In addition, ETFs trade like stocks, so you need to pay a commission each time you buy or sell. But some brokers and investment firms, such as E-Trade, Fidelity, Charles Schwab and Vanguardoffer interest-free ETFs. According to The Wall Street JournalThe average expense ratio for an ETF is around 0,44%. Therefore, if you participate in payments, you will have $ 594 407 in 50 years. This shows how fees can reduce your income and why it is important to look at the fund's expense ratio, and not just on its performance.

Additionally, some investment firms require minimum deposits of thousands of dollars to open some brokerage accounts. Participating in a retirement plan such as a 401k circumvents this problem. But you'll likely contribute $30 a month rather than $1 a day because contributions are typically deducted from your paycheck. Even with the payouts and the fact that you'll need more than $1 to buy an ETF, the benefit of investing in stocks is clear - rather than leaving your money in the savings or money market, or worse, investing somewhere where you don't you will receive no income. You will find that even small amounts can add up significantly over time.

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