Investing is the best way to grow your wealth over the long term, but misconceptions keep a lot of people from giving it a shot. For example, some might worry they could lose their life's savings while investing. But if you diversify your portfolio and invest for the long term, major, lasting losses like this aren't likely.
Another common misconception is that you need a lot of money to make investing worthwhile. More cash certainly helps, but it's never been easier to start investing with small sums. Here's a look at how much you could make investing just $5 a day.
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How to grow $5 a day into six figures
Five dollars a day amounts to about $150 per month or $1,825 per year. You might earn a small amount of interest on your funds if you kept them in a savings account, but your final balance isn't going to be that much different than your total contributions. If you really want to grow your savings, you need to invest them.
Your investment return depends on several factors, including:
- How much you invest
- The investments' rate of return
- How long you hold the investments
Because there are several things at play here, it's not possible to predict exactly how much you'll earn over time. But the following table can give you an idea. It shows how much you'd end up with over different time periods with different average annual rates of return while investing $5 a day.
Time Frame | 6% Average Annual Rate of Return | 8% Average Annual Rate of Return | 10% Average Annual Rate of Return |
|---|
1 year | $1,875 | $1,893 | $1,911 |
5 years | $10,570 | $11,107 | $11,669 |
10 years | $24,716 | $27,427 | $30,461 |
20 years | $68,977 | $86,640 | $109,470 |
30 years | $148,244 | $214,475 | $314,398 |
Source: Calculations by author.
As you can see, there are a lot of possible outcomes. But the table illustrates two key points: The longer you leave your money invested and the better your investments do, the more you end up with in the end.
But only one of those factors is under your control. You can choose how long to invest for, but you can't decide what kind of return you get. That's why it's usually best to be conservative when estimating your savings' growth. Being too optimistic can be dangerous, especially when planning for long-term goals like retirement. If your investments don't do as well as you had hoped, you might not have enough to cover all your expenses.
How to invest $5 a day
A lot of brokerage accounts enable you to get started with small sums these days. There are also robo-advisors that will help you choose your investments after you answer a few questions about your goals and timeline. Then, all you have to do is link a bank account to transfer the funds, and the robo-advisor will do the rest for you. There are fees associated with these services, though.
Another option is to open an account with a broker that allows you to invest in fractional shares. Like the name implies, this allows you to purchase a fraction of a stock share if a whole share is too expensive. But there's usually minimums on how low you can go, so review these before you open your account. If you decide to do this, you can invest in whatever stocks you want, and you'll be able to spread your money more easily among multiple companies, which helps reduce your risk of loss.
Remember to only invest funds you don't plan to use within the next five to seven years. There's a good chance you earn money investing over the long term, but as we've seen the last few years, the stock market can be volatile in the short term. Putting money you plan to spend soon into the stock market is a big mistake.
If you can't spare $5 a day, maybe $5 a week or $5 a month is more feasible. You won't grow your wealth as quickly, but every little bit counts. You can always increase your contributions in the future if your budget allows it.
FAQs
Saving $5 per day
By setting aside just $5 per day (or around $150 per month) and investing it at a 6% return, your savings would grow to: After 10 years: $23,725. After 20 years: $66,214. After 30 years: $142,304.
How much money would you have if you invested $5.00 a day for 40 years? ›
So, let's say you're able to invest $5 a day over a 40-year period. At an average annual 10% return, you're looking at accumulating about $797,000 -- and you'll have only put in $72,000 of your own money over that 40-year stretch. That could serve as a very nice nest egg for retirement.
How much would you have if you saved 5 dollars a day? ›
By saving just $5 a day, you'll have around $150 more in your monthly budget. Sock it away for a year, and a little more than $1,800 would be at your disposal. Consider these 10 easy ways to save $5 each day.
What is the $5 stock rule? ›
According to the SEC, any stock trading under $5 per share whether it is listed on an exchange or trading through pink sheet markets or the Over The Counter Bulletin Board (OTCBB) is a penny stock. In the past, penny stocks were often considered as only those stocks that trade below a dollar.
How much is $30 a day for 1 year? ›
$30 daily is how much per year? If you make $30 per day, your Yearly salary would be $7,800. This result is obtained by multiplying your base salary by the amount of hours, week, and months you work in a year, assuming you work 40 hours a week.
How to turn $5000 into $10000? ›
How can you make $5,000 turn into $10,000? Turning $5,000 into $10,000 involves investing in avenues with the potential for high returns, such as stocks, ETFs or real estate. Another approach is to use the money as seed capital for a profitable small business or side hustle.
What if I invested $1000 in S&P 500 10 years ago? ›
Over the past decade, you would have done even better, as the S&P 500 posted an average annual return of a whopping 12.68%. Here's how much your account balance would be now if you were invested over the past 10 years: $1,000 would grow to $3,300. $5,000 would grow to $16,498.
How much would $1000 invested in the S&P 500 in 1980 be worth today? ›
In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500, then you would be sitting on a cool $1.2 million today.
How much is $5 a day for 30 years? ›
Many young people worry more about paying off their debt than investing, but waiting until you're out of debt to invest can make it harder to realize your goals. Investing just $5 a day into an account with a 10% annual return could net you around $30,000 in 10 years, $330,000 in 30 years and $2.3 million in 50 years.
What is the 365 day money challenge? ›
If you want to start smaller, consider the 365-day penny challenge. For this challenge, you'll need a big jar and a whole lot of pennies. You'll put one penny in the jar on Day 1, two pennies on Day 2, and so on until you're putting 365 pennies on the last day of the year.
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.
Is $5 a penny stock? ›
A penny stock refers to a small company's stock that typically trades for less than $5 per share. Although some penny stocks trade on large exchanges such as the NYSE, most penny stocks trade over the counter through the OTC Bulletin Board (OTCBB).
What is your dollar return if you invest $5000 in the stock and the stock price is $45? ›
Your dollar return if you invest $5,000 in the stock and the stock price is $45, is $-500. Your percent return if you invest $5,000 in the stock and the stock price is $45, is -11%.
What is rule 1 in stock market? ›
It comes from a Warren Buffet idea that Phil Town expounds in Rule #1: Find a wonderful business, determine its value, buy its stock for half that value, and repeat until rich.
How much is $50 a day for 20 years? ›
It'll take a lot of discipline and a high savings rate, but it's doable: “I call it the 50-20 formula: $50 a day for 20 years at a 10% rate of return is over $1 million.” If you save for 30 years, based on that formula, you'd have about $3.39 million, he says.
How much is $10 a day for 10 years? ›
$10 a day Multiplied by 365 days in a year equals $3,650. If you saved $10 a day for 10 years you would have $36,500. As far as gaining money is concerned, I recommend you save that money and then invest it instead of letting it sit in a bank account.
