Tuesday, November 20th, 2018

Ethical Millionairesses: $50/ Week x 45 Years = $1 Million

Published on July 7, 2010 by   ·   4 Comments Pin It

$50/Week x 45 Years = $1 Millionare. Yep. Here’s the math; Many people think: “I’ll never be a millionaire!” But with the power of compound interest, and time, you too can have a million bucks and do something amazing with it – from starting off that pit bull sanctuary you’ve always dreamed of to buying your Mom a home in the Florida sun.

Here’s how:

Let’s say you’re in your twenties and you have about 45 years until you want to retire. (If you’re older, keep reading-the basic math still applies.)

If you invested $50 a week, in one year you would have put away $2,600 ($50 X 52 weeks = $2,600).

But in 45 years, those cash deposits alone would only add up to $117,000 ($2,600 X 45 = $117,000). How does that turn into a million?

Just add water. Every day that your money is invested, it gains interest, then your interest earns interest-and your savings begin to snowball.

Assuming your money earns about 8% per year, on average-a reasonable assumption-here’s how your savings would grow:

* In 10 years you’d have $40,000
* In 20 years you’d have $128,000
* In 30 years you’d have about $325,000
* In 40 years you’d have over $764,000
* By year 45, you’d have $1,001,605

You take it all. The best part: When you contribute money to a Roth IRA, you’ve already paid tax on it-and you don’t have to pay tax when you withdraw the money. That means you can withdraw $1,000,000 entirely tax-free!

Via our beloved money saving sisters at DailyWorth.com; DailyWorth is a free daily personal finance email for women. They deliver practical tips, empowering ideas and the occasional kick in the pants.

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Readers Comments (4)

  1. Marisa says:

    Please tell us where and how to make 8% in this economy.

  2. Jason Das says:

    Yes, I’m wondering too! How can I get 8% average annual growth?!

  3. Hi everyone,

    Note that this post assumes a 45-year investing horizon.

    Historically the average return of the S&P 500 index over the last 30 yearswas 11.27%, according to Standard & Poor’s. (The S&P tracks 500 of the biggest U.S. companies, and is considered a U.S. market indicator.)

    But during the so-called “lost decade” of 2000-2010 the S&P’s average return was 0.30%.

    What does that mean? It means that putting your money in the market will always involve some risk, but if history is any indicator of cycles, the market will go back up. When? We can’t say. Some will argue 10%. Some will argue 4%. If you’re new to investing, I recommend that you read this post about mutual funds, index funds, and understanding management fees. http://www.dailyworth.com/blog/373-the-sexy-side-of-investing

    But yes, there is a lot of debate around what returns will be 10,20,30 years out. That’s why it’s good to know your own risk tolerance and invest accordingly.

  4. Julia Orr says:

    Sorry but I still think this is very misleading. You don’t exactly explain that the 8% you are talking about is an average return worked out over a 30 year period. We are looking at a very bleak period financially in the future. The last depression here wasn’t even facing the same dramatic shifts we are facing. Global climate change, population explosion, food shortage, water shortage so I highly doubt we will be finding even 5% anywhere for the foreseeable future let alone an average of 8%. And you’re saying that earning 8% is a “reasonable assumption”. The only people who will be earning that kind of interest as far as I can see are the stockbrokers fleecing wall street.

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