How to Turn $200 a Month Into $5 Million

The key to seeing massive returns on money that is saved is starting early and often, and the benefits to doing so are huge.

Aug 17, 2014 at 1:30PM


Time is a funny thing. Months and years seem to fly by. Yet days at the office can move so slowly.

But when it comes to investing, sometimes a simple chart can reveal why time can be such a valuable resource, yet at the same time, a terrible thing to waste.

The incredible benefit

Imagine if I told you $200 a month could be turned into $5 million. You'd likely think I was crazy. But as you can see in the chart below, it's not only possible, but some could even argue it's probable:

How To Turn

The chart is showing what $200 put into an S&P 500 index fund through a retirement account each and every month beginning at age 20 and stopping at age 80 would be worth after decades and decades of patient saving and investing. Of course we can't project what the future returns will be, but you can see the remarkable growth even at a very conservative 7% annual interest rate.

And if you think "conservative," isn't the best description, consider in 2008 the stock market fell by 37%, the second worst year on record. But in the 60 years that ended December 31, 2008, the S&P 500 delivered an average annual return of 10.9%. In fact, at the conclusion of the 10 single worst years on record, the average annual return over 60 years was 8.8%.

The reality is, the average return over each of the last 60 years for the S&P 500 stands at a staggering 10.4%.

All of this is to say, projecting you'll see an average return 9% over such a massive period isn't some pie-in-the-sky assumption, it's a reality.

The simple savings

The thing is though, $200 a month sounds like a lot. Yet in small steps, you can get there.

According to the latest data the average American made roughly $46,500 a year. That means saving a little more than 5% of what you earn would equal to $200 a month.

But even more realistically, that means saving $6.58 each day.

In 2012, Americans spent nearly $20 a day on things like eating out, apparel, and entertainment. Sure there's fun to be had, but isn't possible to eat in a little more, or perhaps get the $1.29 movie from Redbox instead of a $10 ticket at the theater? Maybe it's a question of whether or not you really need that new shirt or if you just want it, even if it's marked on sale.

Coca Cola By Deusxflorida

Source: Flickr / DeusXFlorida.

Instead of going to a sit-down restaurant for lunch and getting a $10 meal, a $2.50 Coca-Cola, and leaving a 20% tip -- so you're out $15 plus tax -- maybe you should head to a Chipotle or a Panera Bread. Or next time you're at the supermarket, buy the store brand peanut butter instead of Jiff. They're just peanuts. 

Or instead of getting the Spinach Feta Wrap and a Venti Skinny Vanilla Latte at Starbucks you stick to a Multigrain Bagel and a Grande Brewed Coffee, saving you $4.50. Maybe it's time to hold off on the newest pair from Nike, or perhaps wait until next summer for the latest handbag from Michael Kors.

Heck, thinking big, maybe instead of an Acura, you could get a Honda.

When we really sit down to look at what we need, versus what we want, saving $6.58 a day may be easier than we think.

The key takeaway

Having 60 years to save is easier said than done, and as you can see, starting early is the key to this scenario. If you wait 10 years, the total amount you save out of pocket falls by a little more than 15%, but the value of your investment is cut in half thanks to the powerful work of compound interest.

But there's always time to catch up, and you shouldn't be discouraged. You can nearly match the returns if you double your savings from $200 to $400 starting at age 30.

As they say, there's no time like the present to start saving and investing. You'll be glad you did.

Patrick Morris owns shares of Coca-Cola, Nike, and Starbucks. The Motley Fool recommends Chipotle Mexican Grill, Coca-Cola, Michael Kors Holdings, Nike, Panera Bread, and Starbucks. The Motley Fool owns shares of Chipotle Mexican Grill, Michael Kors Holdings, Nike, Panera Bread, and Starbucks and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers