Should you always invest your money?
Saving is generally seen as preferable for investors with short-term financial goals, a low risk tolerance, or those in need of an emergency fund. Investing may be the best option for people who already have a rainy-day fund and are focused on longer-term financial goals or those who have a higher risk tolerance.
In general, you should save to preserve your money and invest to grow your money. Depending on your specific goals and when you plan to reach them, you may choose to do both. “When deciding whether to save or invest your money, it is essential to prioritize determining when you will need it,” says Maizes.
Investing can bring you many benefits, such as helping to give you more financial independence. As savings held in cash will tend to lose value because inflation reduces their buying power over time, investing can help to protect the value of your money as the cost of living rises.
Avoiding investing means avoiding building wealth
Many experts agree that investing is one of the best ways to build long-term wealth. Long-term wealth.
You're Not Financially Ready to Invest.
If you have debt, especially credit card debt, or really any other personal debt that has a higher interest rate.
It's extremely unlikely you'll earn 10% returns every single year, but the annual highs and lows have historically averaged out to roughly 10% per year over several decades. Over a lifetime, it's possible to earn over half a million dollars with just $100 per month.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
Investing only $50 a month adds up
Contributing $50 a month to an investment account can help create impressive savings, even at a moderate 5% annual growth. It's a common myth that you need a few thousand dollars to begin investing.
Investing just $100 a month can actually do a whole lot to help you grow rich over time. In fact, the table below shows how much your $100 monthly investment could turn into over time, assuming you earn a 10% average annual return.
If you don't need the money for at least five years (or longer) and you're comfortable taking some risk, investing the funds will likely yield higher returns than saving. If you're eligible for an employer match in your retirement account, such as a 401(k).
Is $100 too little to invest?
If you think $100 won't be enough to invest, think again. With a little patience and discipline, you can grow that small sum of money quickly. After all, the amount you invest at first is not really what matters when it comes down to it. It's all about getting started.
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
Common Reasons People Avoid Investing
Savings accounts pay you interest—but not a lot. The average savings account interest rate is only . 01%, and the best rates out there hover around 1.7%. But, with the current inflation rate at 0.6%, all that money you've socked away in savings is actually losing money.
Investing can help you turn your money into more money, even when you start small. A $1,000 investment—whether you pay down debt, invest in a robo-advisor, or get your 401(k) match—can help lay the foundation for a prosperous financial journey.
(If you have additional questions about investing or retirement, this tool can help match you with potential advisors.) It's never too late to start investing, but starting in your late 60s will impact the options you have.
According to our calculations, a $1000 investment made in February 2014 would be worth $5,971.20, or a gain of 497.12%, as of February 5, 2024, and this return excludes dividends but includes price increases. Compare this to the S&P 500's rally of 178.17% and gold's return of 55.50% over the same time frame.
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.
$1,176,000. You do NOT have to retire broke.
Are you approaching 30? How much money do you have saved? According to CNN Money, someone between the ages of 25 and 30, who makes around $40,000 a year, should have at least $4,000 saved.
How to budget $4,000 a month?
making $4,000 a month using the 75 10 15 method. 75% goes towards your needs, so use $3,000 towards housing bills, transport, and groceries. 10% goes towards want. So $400 to spend on dining out, entertainment, and hobbies.
A popular standard for budgeting rent is to follow the 30% rule, where you spend a maximum of 30% of your monthly income before taxes (your gross income) on your rent. This has been a rule of thumb since 1981, when the government found that people who spent over 30% of their income on housing were "cost-burdened."
The short answer to what happens if you invest $500 a month is that you'll almost certainly build wealth over time. In fact, if you keep investing that $500 every month for 40 years, you could become a millionaire. More than a millionaire, in fact.
With careful planning and wise investments, that $500 a month can easily turn into financial security in your later years. Imagine stepping away from full-time work with the knowledge that you're financially secure and comfortable to do so.
A common myth about investing is that a big fat bank account is required just to get started. In reality, building a solid portfolio can begin with a few thousand—or even a few hundred—dollars. Here is some specific advice, organized by the amount you may have available to begin your investments.
References
- https://www.nasdaq.com/articles/dont-be-afraid-to-invest-be-afraid-if-you-dont
- https://www.fool.com/the-ascent/banks/articles/what-if-i-can-only-afford-to-save-200-per-month/
- https://finance.yahoo.com/news/invest-100-000-turn-1-124500592.html
- https://www.sofi.com/learn/content/consequences-of-not-saving-money/
- https://www.forbes.com/advisor/investing/financial-advisor/how-to-build-wealth/
- https://medium.com/@Levente22/9-simple-tricks-to-make-an-extra-2-500-each-month-at-home-0b6e0e6392ef
- https://finance.yahoo.com/news/invested-1000-p-global-decade-133005715.html
- https://www.investopedia.com/articles/personal-finance/031215/why-saving-money-important.asp
- https://www.investopedia.com/articles/personal-finance/123115/best-ways-invest-500-5000.asp
- https://timesofindia.indiatimes.com/readersblog/blogs-of-preetish/importance-of-money-50590/
- https://finance.yahoo.com/news/ask-advisor-am-too-im-142734001.html
- https://www.investopedia.com/financial-edge/0311/7-real-life-ways-to-become-a-billionaire.aspx
- https://apnews.com/buyline-personal-finance/article/investing-for-beginners
- https://www.linkedin.com/pulse/how-money-affects-our-everyday-lives-jason-jacobson
- https://njaes.rutgers.edu/sshw/message/message.php?p=Finance&m=133
- https://www.moneysavingexpert.com/savings/investment-beginners/
- https://medium.com/@Levente22/7-proven-ways-to-make-5-000-9-000-per-month-in-passive-income-1aafbf025154
- https://www.uccu.com/the-importance-of-money-beyond-the-materialistic-perspective/
- https://localfirstbank.com/article/how-much-money-should-i-have-saved-by-the-time-i-am-30/
- https://finance.yahoo.com/news/passive-income-7-ways-extra-130052593.html
- https://www.ramseysolutions.com/retirement/how-to-become-a-millionaire
- https://finance.yahoo.com/news/living-off-interest-1-million-164122384.html
- https://smartasset.com/investing/investing-100-a-month-how-much-will-you-make
- https://www.fool.com/the-ascent/buying-stocks/articles/starting-to-invest-in-2024-heres-how-much-youll-need-to-become-a-millionaire-in-30-years/
- https://finance.yahoo.com/news/7-things-must-start-making-173436243.html
- https://www.nasdaq.com/articles/10-unique-ways-to-invest-$100-and-grow-it-to-$1000
- https://brainly.com/question/36948324
- https://smartasset.com/investing/how-to-invest-100k
- https://www.dowjanes.com/blog/build-wealth-from-nothing
- https://www.bankrate.com/investing/statistics-for-beginning-investors/
- https://www.investopedia.com/financial-advisor/how-much-save-to-become-millionaire/
- https://www.acpsd.net/cms/lib/SC02209457/Centricity/Domain/2540/Chapter%202%20PERSONAL%20FINANCE%20STUDY%20GUIDE%20CHAPTER%202%20SAVING.docx
- https://www.linkedin.com/pulse/top-11-ways-earn-10000-passive-income-each-month-make-surya-prakash-3rbrc
- https://www.investopedia.com/articles/investing/022516/saving-vs-investing-understanding-key-differences.asp
- https://www.forbes.com/sites/melissahouston/2024/03/21/how-to-become-wealthy-in-5-years/
- https://www.fool.com/investing/2024/01/28/heres-how-investing-200-per-month-can-create-1-mil/
- https://finance.yahoo.com/news/jaspreet-singh-step-step-plan-140052632.html
- https://www.ecb.europa.eu/euro/cash_strategy/cash_role/html/index.en.html
- https://talkmarkets.com/content/how-much-money-do-i-need-to-invest-to-make-3000-a-month?post=431352
- https://www.tiktok.com/@polymathematic/video/7213479237326605610
- https://www.talent.com/convert?salary=3000&start=month&end=year
- https://www.thriventfunds.com/insights/investing-essentials/investing-50-a-month-could-add-up-nicely-for-your-retirement.html
- https://finance.yahoo.com/news/much-retirement-saved-100-month-130108345.html
- https://www.moneylion.com/learn/things-to-save-up-for/
- https://money.usnews.com/investing/articles/best-performing-stocks-of-the-year
- https://www.bankrate.com/investing/how-to-invest-like-millionaire/
- https://www.fca.org.uk/investsmart/should-you-invest
- https://www.gripinvest.in/blog/earn-50K-per-month
- https://www.mjjaccountants.com.au/wealth-creation-strategy/saving-150-a-week/
- https://poe.com/poeknowledge/1512928000358234
- https://www.sofi.com/learn/content/reasons-people-dont-invest/
- https://www.fool.com/the-ascent/buying-stocks/articles/could-investing-just-10-a-day-change-your-life/
- https://www.dentaltown.com/blog/post/19622/how-to-invest-100k-for-passive-income-proven-strategies
- https://www.principal.com/individuals/build-your-knowledge/when-start-investing-4-signs-youre-ready
- https://homework.study.com/explanation/how-much-will-100-000-grow-to-in-30-years-at-a-5-and-8-annual-return.html
- https://fortune.com/recommends/banking/saving-vs-investing/
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-what-happens-when-you-invest-500-a-month/
- https://www.chase.com/personal/banking/education/budgeting-saving/how-much-income-should-go-to-rent
- https://www.nerdwallet.com/article/investing/how-to-start-investing
- https://www.fairwinds.org/articles/how-to-tell-the-difference-between-your-wants-and-needs
- https://www.wsj.com/buyside/personal-finance/saving-vs-investing-01657732972
- https://finance.yahoo.com/news/much-interest-earn-1-million-150000229.html
- https://finance.yahoo.com/news/become-millionaire-scratch-one-120013196.html
- https://time.com/personal-finance/article/ways-to-invest-1k/
- https://www.nysaves.org/home/basics-of-529s/saving-early-matters.html
- https://www.unfcu.org/financial-wellness/50-30-20-rule/
- https://www.raseedinvest.com/learn/how-to-start-investing-for-as-little-as-1
- https://medium.com/@dontworkanotherday/how-to-double-2000-in-24-hours-9-easy-methods-dc9ee24571fb
- https://www.shopify.com/blog/passive-income-ideas
- https://www.nasdaq.com/articles/kevin-oleary%3A-by-age-33-you-should-have-%24100k-in-savings-how-to-get-started
- https://www.thebalancemoney.com/what-is-the-rule-of-72-how-can-it-help-you-double-your-money-453756
- https://www.tiktok.com/@claudayo/video/7257549228141038853
- https://www.bankrate.com/investing/passive-income-ideas/
- https://thebudgetnista.com/is-saving-500-a-month-good/
- https://money.usnews.com/investing/articles/best-long-term-stocks-to-buy
- https://lyonswealth.com/blog-details/how-much-money-do-i-need-to-invest-to-make-3000
- https://www.nerdwallet.com/article/investing/how-to-invest-money
- https://finance.yahoo.com/news/earn-500-per-month-realty-185123122.html
- https://extension.umn.edu/personal-finances/saving-and-investing-your-future
- https://www.nasdaq.com/articles/how-to-generate-passive-income-with-just-$10
- https://www.thesalesblog.com/blog/why-you-must-invest-in-yourself
- https://www.bankrate.com/banking/savings/top-reasons-to-save-money/
- https://retirehappily.net/five-reasons-why-you-should-not-invest-in-the-stock-market/
- https://finance.yahoo.com/news/turn-100-000-investment-1-161238030.html
- https://www.experian.com/blogs/ask-experian/pros-and-cons-of-savings-accounts/
- https://www.investopedia.com/articles/stocks/09/five-ways-double-investment.asp
- https://smartasset.com/investing/how-to-make-100k-a-year-in-passive-income
- https://bloggerspassion.com/ramit-sethi-net-worth/
- https://www.bankrate.com/investing/saving-vs-investing/
- https://www.nasdaq.com/articles/how-far-will-%24100-per-month-go-by-investing-in-the-sp-500
- https://www.forbes.com/advisor/banking/savings/why-is-it-important-to-save-money/
- https://www.fool.com/the-ascent/buying-stocks/articles/will-investing-100-a-month-really-make-a-difference-in-your-net-worth/
- https://www.tiaa.org/public/learn/personal-finance-101/how-much-of-my-income-should-i-save-every-month
- https://www.moneycontrol.com/msite/hdfc-life-insurance-plans/7-ways-to-create-wealth-6165581.html
- https://www.gobankingrates.com/money/making-money/how-to-earn-4000-dollars-a-month-in-passive-income/
- https://www.regions.com/insights/personal/personal-finances/budgeting-and-saving/10-best-ways-to-save-money
- https://www.physicianonfire.com/how-to-invest-100k/
- https://flippa.com/blog/radical-fire-how-to-turn-10k-into-100k-12-top-ways-to-do-it/
- https://www.fool.com/the-ascent/buying-stocks/articles/you-wont-get-rich-by-putting-money-in-savings-do-this-instead/
- https://finance.yahoo.com/news/7-ways-start-building-wealth-123008400.html
- https://www.gobankingrates.com/investing/strategy/how-to-invest-100-to-make-1000/
- https://www.facebook.com/daveramsey/posts/100-a-month-invested-from-age-25-to-65-is-1176000-you-do-not-have-to-retire-brok/906829020806713/
- https://www.fool.com/investing/how-to-invest/how-to-invest-100-dollars/
- https://financeintheclassroom.org/downloads/WhatSavingswhyimportant.pdf
- https://www.fool.com/the-ascent/personal-finance/articles/heres-what-happens-when-you-invest-10-a-week-over-10-years/
- https://www.forbes.com/sites/pattieehsaei/2023/10/12/you-can-afford-to-invest-start-with-just-100-per-month/