If You Put Aside $5 Every Day, Here's How Much You Could Save

The current economic climate in the United States has undeniably been crushing Millennials and Gen-Z. Over the past four years since the COVID-19 Pandemic, inflation has been running rampant in the country, scorching everything in its path. Food, gas, housing prices, and more have become increasingly expensive at a rate most young people just can't keep up with financially. This being the case, a great deal of young Americans are having a hard time investing in their future due to their daily expenses being so out of control. In fact, according to a study published by CNBC, nearly 50% of all young adults don't have enough money saved to pay for two months worth of everyday expenses, and 44% of Americans don't even have $1,000 in savings in the first place.

However, while economically things may seem pretty dark right now, there still exists a glimmer of hope for younger generations to ensure themselves future financial success. You see, when investing for the future, many people don't realize how far a little can go. So instead of framing investing like setting aside a certain percentage of your paycheck every month, what if you tried a simpler approach? Investing as little as $5 a day could all but guarantee you financial abundance in the future if done properly. Let's take a look at how much money one could save if they put aside $5 every day.

At first thought, saving $5 a day certainly doesn't seem like it could be the key to unlocking generational wealth. However, it really all depends on where that daily $5 investment is allocated to. Putting away $5 into a savings account in your typical bank is not going to yield very great results. This is because in a savings account at a large bank like Chase, the average yield is only 0.01-0.02% APY. That would mean that $5 a day investment (which is $150 a month) after one year would only amount to around $1,818 or $1,836 a year. That isn't very promising. At that rate, in 30 years you'd have somewhere roughly in the range of $55,000 saved, which is nothing close to how much you should really have saved for retirement.

That being said, the key to making that $5 a day provide you with more abundant results over a long time horizon is to invest it in the right place. For those looking for the easiest and safest bet, the best place to allocate your $5 is going to be in an ETF (exchange-traded fund) which is essentially a basket of many different stocks. For example, an ETF like the S&P 500 has an average annual return of 10.95% over the last 30 years. That means your $5 daily investment on average will bring you around $428,264 in 30 years time, or $1,313,093 in 40 years.

Now if you're looking for even better returns over time with the same degree of safety that the S&P 500 will provide, your next best bet will be an ETF like the Investco QQQ Trust. Over the last 10 years, this ETF has grown 420% compared to the 220% the S&P 500 has grown during the same time frame. This makes out to be about a 17.9% annual return for the QQQ, but for safety's sake let's just round that down to about 15% just in case. Even at that rate, by investing $5 a day, in 30 years you'll be sitting on over $1 million. Not too bad when you look at it like that.

Investing $5 a day doesn't have to be a hard feat to accomplish. If you're concerned as to whether or not you're going to remember to invest $5 a day over the next 30-40 years, don't worry. It's fairly simple using your average stock trading application like RobinHood to set up an automated $5 daily repeated investment into your preferred ETF and shouldn't take longer than five minutes to set up. Framing it like this, setting yourself up for future success doesn't seem difficult at all. $5 is roughly the price of a cup of fine coffee, and if that money is automatically being allocated to one of the aforementioned ETFs daily, you can financially prepare for the future without even having to remotely think about it.