In One Chart: Here’s what happens when you save just $25 more each month

This one goes out to everyone who’s struggling to save. (That is, most Americans.)

You can save really small amounts of money — like just $25 a month — and still end up with an impressive nest egg, according to financial analyst Ben Carlson on his blog A Wealth of Common Sense.

Here’s how Carlson broke it down.



Courtesy of A Wealth of Common Sense

Try to start by saving just $25 per month, he said. That’s a realistic goal for many, he said. “If you can’t save 25 bucks a month I don’t know what to tell you.”

If you saved $25 a month from age 22 to age 65 and earned 6% per year on that investment (that consistency is unrealistic, he said, but helps illustrate the point), you would end up with a little more than $60,000.

But if you increase your savings just a bit each month, you’ll end up with a lot more.

If you add just $5 more each month during that time frame, you will end up with more than $215,000, he showed.

And if you add $50 a month more, you’ll end up with $1.6 million.

The average annualized return in the U.S. stock market from the 1920s through 2010s was 9.6%. (Bond returns are generally lower but steadier.)

“Building wealth from a young age doesn’t require a ton of money as long as you remain disciplined and work your way up to a healthy savings rate,” he said.

To be sure, many Americans struggle even saving those small amounts.

Just 29% of Americans have six months or more in emergency savings, according to a recent study from the personal-finance website Bankrate.com.

And the median American household currently holds just $11,700 in savings, according to a recent analysis of Federal Reserve and Federal Deposit Insurance Corp. data by personal-finance site Magnify Money.

Get a daily roundup of the top reads in personal finance delivered to your inbox. Subscribe to MarketWatch’s free Personal Finance Daily newsletter. Sign up here.

Maria LaMagna covers personal finance for MarketWatch in New York.

We Want to
Hear from You

Join the conversation

الموقع يستعمل RSS Poster بدعم القاهرة اليوم