Saving a Dollar a Day and Intelligent Investing
What does one dollar buy these days? Not much really, a dollar won’t even buy you the cheapest hamburger at McDonalds.But this shouldn’t fool you into thinking that a dollar is worthless. In fact, if you saved one dollar a day, it would accumulate to a much bigger amount later.
But just how much money do you stand to save if you did start saving a dollar a day? Would it be able to fund your retirement? Let’s find out:
Table of Contents:
1. Just Saving With No to Little Interest2. Putting Your Dollars in a Mutual Fund
3. Putting Your Dollars in Stocks
Final Words
The Details:
1. Just Saving With No to Little Interest
Saving a dollar a day and not investing it to earn interest would net you USD 18,250 after 50 years.
Clearly, saving a dollar a day would not make you rich. But let’s say you increased your effort 10 times more and saved USD 10 a day, this would result in you having USD 180,250 after 50 years.
Although still not able to fund your retirement, USD 182,500 is already a sizable savings. This is already about three times the average annual salary in the US.
Saving ten dollars a day is a lot more difficult than saving only one dollar a day, but as you can see, there is a big difference in the savings results between the two.
But let’s get back to saving one dollar a day, if you put your money in a savings account with the standard one percent interest, you would have saved USD 23,646 by the end of 50 years. As you can see, just a small interest can go a long, long way to increasing your savings.
Back To Summary List
2. Putting Your Dollars in a Mutual Fund
A mutual fund pools money from many participants which it uses to buy a portfolio of stocks, bonds and other securities. Mutual funds sells shares to investors, with each share representing an equity ownership stake in the mutual fund and the income it generates.
In theory, mutual funds should return a higher rate of interest than ordinary savings accounts in banks. If you have selected the right mutual fund, you can see a big increase in your savings.
For example, the USAA Nasdaq-100 Index Fund (USNQX) has an annual average 10 year return of 18.35%.
As you can see, this index fund had returned 18 times more than a standard 1% savings account interest. This clearly indicates that saving a dollar a day coupled with intelligent investing gives a higher return than mere savings with no to little interest alone.
Back To Summary List
3. Putting Your Dollars in Stocks
If mutual funds are financially riskier than savings accounts, then stocks are much more riskier than mutual funds. However, stocks can prove to be much more profitable than mutual funds and especially savings accounts.
In fact, one of the top performing stock over the last 30 years have been Broadcom (Ticker Symbol: AVGO). It has an annual average return of 36.3% which is way more higher than the mutual fund we previously discussed before which is USAA Nasdaq- 100 Index Fund.
This stock returned twice the return of the mutual fund and 36 times that of a savings account interest.
But to repeat again, stocks are way more financially riskier than mutual funds. A stock’s current performance is no indicator of its future performance.
This is a much more clearer indicator that saving a dollar a day coupled with intelligent investing gives a higher return than mere savings with no to little interest alone or mutual funds.
Back To Summary List
Final Words
Saving a dollar a day with little to no interest won’t make you rich, even if you do it for decades like 50 years.
There are mutual funds that can increase the return of a savings account interest by up to 18 times or more.
There are also stocks that can increase the return of a savings account interest by up to 36 times or more.
Though you may just be saving a dollar a day, coupling it with intelligent investing could yield high profits. The combination of diligent savings and intelligent investing is the secret to financial success.
Back To Summary List
You Might Be Interested To Read This Article:
You Cannot Save Money Until You Earn More
Many finance guru advocate that people save as much as they can in order to retire comfortably. This may be true in some cases but we live in the real world where there are real world limits. Simply put you cannot save money if the amount you earn is less than the amount you need to survive on a Basic Level...