Investing $350 to create $1.2 Million

We learn from the honeybees that tiny investments can grow to become great ones. In a lifetime, a honeybee will only produce 1/12th of a teaspoon of honey. But combined with all the other tens of thousands of bees, a hive often produces 100 pounds of honey or more.

With investing it’s the same thing. As I discuss in my book, putting away small amounts of money each week or every time you get paid adds up to great things. Start today with $250/month; in 30 years, you will have $375,323. Over 40 years you would have $878,820. Now, if you can spare $350 per month, you would have just over 1.2 million dollars after 40 years*. In Canada, you can put those funds and investments into a TFSA, making any gains tax-free. In the United States other investment accounts are available that allow for the same tax treatment, but you would need to hold those until retirement.

More evidence of how little bits become big bits can be found in the book I just finished, Junk to Gold, by Willis Johnson, founder of Copart. In this book, Johnson chronicles his journey from working with his father at a young age to gradually learning about the benefits of breaking down cars into little bits and selling each for a profit. Over time, he has created a multi-billion-dollar company and has become a trendsetter within his industry.

If you remember, when we used cash for our small purchases, you probably had a container where you would throw your loose change. Over time, if you took it all out and counted, you often noticed how quickly those nickels and dimes grew. Children were often given piggy banks to collect loose change or gifts and later take them to a bank to deposit.

Today, we don’t use much cash, but new technology can help us with the same discipline for saving. Wealth Simple and other financial services companies have cards with round-up features that do the following. Let’s say you purchase a coffee for $3.25. Using their debit card, they round that up to $4.00, where 75 cents is placed into your investment account, the remainder paying for your coffee. Over time, this adds up. If you buy one coffee a day, that’s $53,078 after 40 years just from coffee*. Now, you will likely buy more than a cup of coffee with your debit card, where the final number can be rounded up so that the change goes into your account. Using this strategy, you can earn hundreds of thousands of dollars for your retirement.

Just like having money taken out of your account and placed into an investment account each time you get paid, this works because once you set it up, you don’t have to do anything else. It’s automatic. The little bits are not noticed and do nothing to change your lifestyle.  Simple.

Find out if fees are associated with this rounding-up service before you commit. Even .05% adds up to big numbers over time. Little bits of expense do add up to significant amounts.

*Assuming an investment return of 8% per year.

To learn more, subscribe to my weekly podcast, Bee Money Simple. It’s available on iTunes or wherever you get your podcasts.

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