Here's What Happens When You Invest $100 a Month for 40 Years

You'll often hear that it's important to save and invest money on a consistent basis. But when you're limited on funds, that's not always an easy thing to do.

These days, many people are having a hard time covering their basic living expenses due to inflation. So the idea of carving out thousands of dollars a year to pump into your brokerage account may, frankly, be out of the question.

But here's the good news. You don't actually have to invest a ton of money on a monthly basis to build up a lot of wealth over time. In fact, you can do really well for yourself even if you're only investing $100 a month.

It's a matter of how you're investing

A $100 monthly investment over 40 years could leave you more than $500,000 richer -- if you choose the right investments, that is. Over the past 50 years, the stock market has delivered an average annual 10% return (before inflation), as measured by the performance of the S&P 500 index. So if you load up your portfolio with S&P 500 stocks or ETFs, then there's a good chance your portfolio will deliver a similar return.

In that case, investing $100 a month over 40 years will leave you with an ending balance of around $531,000. Meanwhile, you'll only be contributing a total of $48,000 to get to that point. So all told, you're looking at a $483,000 gain, which is pretty impressive.

But to be clear, this sort of gain generally won't be possible if you play it too safe in your portfolio and stick to more conservative assets, like bonds. In fact, let's say a bond-heavy portfolio gives you a 5% average annual return over time, which is pretty generous since, in reality, you're probably looking at a bit less. In that case, investing $100 a month over 40 years will leave you with roughly $145,000. That's only a $97,000 gain.

Stocks are worth the risk in the long run

Some people are hesitant to invest in stocks because they tend to be a lot more volatile than bonds. And that's understandable.

But one thing you should know is that if you don't invest in stocks, you run a different risk -- winding up with a lot less money at the end of your savings window. In fact, let's say you're investing that $100 a month over 40 years for your retirement. A $145,000 nest egg may not go very far, whereas a $531,000 nest egg could make it so you're able to cover your expenses and live comfortably without financial worries.

If you're truly scared to put your money into stocks, consider adding S&P 500 ETFs to your portfolio. This way, you're investing in the broad market rather than taking a chance on a few individual companies.

Plus, this option allows you to build a portfolio that's instantly diversified. And diversification is an important part of growing wealth while minimizing losses along the way.