What if You Invested $1 per Day for 30 Years

one dollar per day 30 years

Saving money is not an easy thing to do. Gas prices are insane, inflation is through the roof, and even a cheeseburger seems like it costs ten times what it used to. After you pay for all that, finding any money to put into your savings is a real struggle. And while some people find a way to do it, nearly 1 in 5 Americans didn’t save any money in 2021. 

And, on top of that, another 48% of the American population was only able to save under $5,000, which isn’t a whole lot of money when you consider how much it costs to retire, or to raise a kid, or to buy a house. 

And this problem that we’re seeing today really points to two issues in my mind: the fact that real wages have taken a nosedive since 2020, meaning that people’s paychecks aren’t going nearly as far as they were back then, and that makes it way harder to save. And the second issue is just that people aren’t educated about the importance of saving. 

Yes, a lot of people think about money the wrong way. They think that if they make $1,000 a month, then they have $1,000 to spend that month on clothes and shoes and dinners. And they never think about saving. 

But, if you could just put a little bit of that money to the side, then you’d be setting yourself up for a way better financial future. Well, in this article, I’m going to show you the importance of saving and saving the right way. And, to illustrate this point, let’s take a look at what would happen if you saved just $1 a day for the next 30 years. 

$1 for 30 Years

invest one dollar per day

So, you make a plan that every day, you’re going to put $1 into your savings. Well, that’s a start. But, to be clear, you should be saving a lot more than $1 per day if you ever want to achieve financial freedom. 

According to the TIAA, you should be saving at least 20% of your savings per month. And, according to the Bureau of Labor Statistics, the average American makes about a $1,000 a week or about $142 per day. If we take 20% of $142, then we get about $28 per day. And that’s how much you should be saving on the average American salary. 

And, if you save that much, without interest, that would result in over $306,000 in 30 years which isn’t too bad. Again, that’s excluding interest, which is going to be a big factor later in this article.

If you make more than $1,000 a week, then you should shoot to save more. If you make less than $1,000 a week, then you may only be able to save less than $28 per day. But, everyone should strive to save as much of their pay as they can, especially when they’re young. 

But, enough of my preaching. Let’s look at how much just $1 per day would add up to over 30 years. There are 365 days in a year. So, 365 multiplied by 30 is $10,950. So, after 30 years, that’s how much money you would have, right? $10,950? Well, no, not exactly.

That’s because we’re ignoring one very important aspect of saving: interest. And where you save your money is going to have a huge impact on how much interest you earn. 

The Power of Compound Interest

compound interest

Now, in the previous example that we did without factoring in interest, the total for saving $1 for 30 years was $10,950, which isn’t much at all by today’s standards. That won’t even buy you a used car anymore.

But, let’s take a look at what happens when you put your money into an interest-earning account. And, most investment experts, including Warren Buffet himself, would recommend that you put your money into a low-cost S&P 500 index fund. 

To do this, you’re going to need a brokerage account or an IRA. And, then, you’re going to need to choose the best S&P 500 index fund for you. If you’re new to this, all S&P 500 index funds perform pretty much the same, so you just want to find the one with the lowest expenses. And that’s the Fidelity 500. So, that’s the one I would go with. 

If you put your $1 per day in an S&P 500 index fund instead of stuffing it under your mattress, it’s going to benefit from gains and compound interest. And, if we look at the history of the S&P 500 (which is an index of the 500 largest companies in the United States that was started in 1957), we see that it’s had an average annualized return of almost 12% since it started. However, let’s use 10% just to be conservative here. 

So, you save $1 per day for 30 years with a return rate of 10%. At the end of those 30 years, you’re going to have over $66,000. That’s over 6 times the amount of money that you would have contributed to your savings. And that first dollar that you put into your savings, would have grown into over $17. That right there is the power of compound interest. 

Every dollar that you put into your account would be earning interest. And you earn interest on that interest, and then you earn interest on the interest you earned on that interest, and so forth. 

So, instead of your money growing linearly, like it would if you just stuffed those dollars underneath your mattress, your money is growing exponentially. And that’s going to make a massive difference. 

In fact, at 10% interest, the balance that you have after 30 years is going to be 83% interest earnings and just 17% is going to be the money that you actually put into your account.

So, you can see how important it is to save your money in a place that earns a lot of interest. And this is where a lot of people miss out. They put their money in a savings account with their bank and never invest it. And most savings accounts that you would have at Chase or Bank of America or Wells Fargo only pay 0.13% interest right now.

And, at that rate, you’re only going to earn a little over $200 in interest over those 30 years. That’s pretty much nothing compared to the $55,000 you would earn if you’d put your money in an S&P 500 index fund that earns 10% annually.  

So, regardless of how much money you’re saving every day or every week or every month, make sure that you’re putting your money into one of these index funds or some other investment that earns a similar amount of interest. And don’t let it just sit around and collect dust in a savings account that pays pretty much no interest.

Don’t Interrupt the Process

time and investing

Charlie Munger, Vice Chairman of Berkshire Hathaway and Warren Buffet’s right-hand man, has a famous quote about compounding. He says, “The first rule of compounding: never interrupt it unnecessarily.” And this couldn’t be more true. 

When you start withdrawing money from your investment account, you interrupt the process of compounding and you start missing out on the interest earnings that you could’ve had if you’d just let the money sit in your account longer. 

To illustrate this point, let’s do a similar example to the one we just did in the last section of this article, except, after 5 years of saving $1 per day in your investment account, you decide to cash out and get a flashy new paint job for your car or something. 

The 5 years goes past and you see that you have $2,250 sitting in your account and you’re like, “Damn, my Honda Accord could really use racing stripes, but they cost $2,250.” But, you can’t resist and you pull the trigger on those racing stripes. 

Then, you start saving from square one again for the next 25 years. At the end of those 25 years, still saving $1 a day at a 10% return, you have almost $39,000 in your account which is still a gain of nearly $30,000 on interest. However, if you hadn’t taken that money out, you would have over $66,000 in your account and you now have about $27,000 less in your account than you would have if you’d just decided not to get those racing stripes and left the money in your account to collect interest. 

So, while the racing stripes only cost $2,250 upfront, they cost you about $25,000 in interest earnings. And was that really worth it just to make your Honda Accord look badass for a few years? I didn’t think so. 

And, yes, I know the example of racing stripes is a bit absurd, but this is really what you need to think about before you withdraw money from your investment account. You should ask yourself, “Do I really need this? Or would I be better off with this money in my investment account collecting massive amounts of interest over time?” The answer is usually the latter. 

When it comes to compounding, time is your best friend, which is why it’s so important to start investing as early as possible and leaving your money alone to collect interest once you invest it. 

Will $1 per Day Make You Rich?

investing to get rich

So, will saving $1 per day make you rich? The short answer is no. That $66,000 that you can have after 30 years is certainly impressive and shows how much compound interest can do for you. But that’s not that much money in the scheme of things, especially after it’s been affected by 30 years worth of inflation, which pretty much devalues every dollar by around 4% on average every year. 

Even in today’s money, $66,000 isn’t enough to buy a house or retire or raise a kid or send them to college. So, the unfortunate truth is that, if you want to be financially comfortable in the future, you’re going to need to save a whole lot more than $1 per day. 

Let’s take it back to earlier in this article when I said that the average American makes about $1,000 a week, which comes out to about $52,000 per year or $142 per day. If we go with the 20% savings rule that I mentioned earlier, that means that the average American should be saving $28 per day. 

Now, let’s plug that $28 into the same equation that we did for $1. If you saved $28 each day for the next 30 years, put it all in an S&P 500 index fund that earned 10%, your money would grow to over $1.8 million. You read that correctly. 

On an average American salary, you can save up $1.8 million in 30 years just by being disciplined, saving 20% of your salary, and following this strategy. That’s over $1.5 million you would have earned from interest alone. That’s insane! 

Now, what if you saved 30% of your income instead of 20%, or around $42 a day instead of $28 a day. That’s nearly $2.8 million after 30 years and interest earnings of over $2.3 million! So, becoming a multi-millionaire is achievable even if you work an average job and earn an average salary. It just takes the discipline to save 20% or 30% of your money each month and then not touch it.

Of course, it’s not quite that easy. At some point, you’ll probably have to dip into your savings to make a down payment on a house or pay for some unforeseen medical expense or put your kid through college. And these things happen and derail our savings plans. It’s just part of life. 

But, the reason I wrote this article is to show you how powerful compound interest can be, especially when you start saving early. So, whenever you can, start contributing whatever money you can, even if it’s just $1, to an S&P 500 index fund or some other similarly safe investment with a similar return. And let it sit in there for as long as you can. 

As you’ve just seen, it can turn into a very significant amount of money with enough time and set you up for a comfortable financial future. 

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