Frank over Hello, Dollar! tried to use an example on saving – bring your lunch to work and save money to show some basic saving principle. It may not be much if you are just saving those money alone and keep it in your piggy bank, but if you save it into bank or invest into stock and have the money running at compound interest, then the sum of money will be significant after 40 years of saving:
… Say I put that $1,000 a year into savings and CDs that paid an average of 5% interest. That $40,000 has now turned into $120,799! Wow! Not bad for packing a sandwich four times a week. But we can still take this one level further.
Let’s try putting that $1,000 into the stock market instead. Historically, the stock market has provided an average return of about 11%. You’ll want to make sure money in the stock market is invested for the long haul, since it does go up and down, and you don’t know when a down time might happen. But I have 40 years here, so I’m going to put my money in stocks and leave it there.
What is that average return of 11% going to do to my $1,000 a year? My $20 a week? My measly little $5 a day, four days a week? Well, I now have a grand total of $581,826. Well over a half million dollars! And hopefully all the fiber I’ve eaten from those whole wheat sandwiches will keep me healthy enough to enjoy it!…
Brown-Bag It to Half a Million – [Hello, Dollar!]
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