I stumbled on a tip while scrolling through Instagram a few weeks back. Someone (younger than me), posted that their best money tip had been to save $10 a day. I liked this concept because it’s simple and anyone can probably come up with a way to find $10 a day (pack your lunch instead of buy it, work an extra shift at work, pick up a side gig, teach an extra VIPKid class, etc.)
This person saved $10 every day for five years. Now that those five years have passed, they have amassed a cool $18k and change! They were going to put it towards a house down payment — all before the ripe old age of 25.
My mind was blown. I couldn’t even get my head around the idea that they thought of doing something so simple (and not even for that long of a period). All you really have to do is turn it on auto-pilot to automatically transfer $300 (or $310) per month and watch it grow.
I am 6 years past that ripe age of 25 and have not done this or even considered this until now. But now my head is spinning with ideas.
What would I do with 20k in 5 years?
Let’s play with numbers for a moment. Let’s use this $10 a day scenario for the course of 5 years.
$10 per day x 365 days = $3650 per year
$3650 per year x 5 years = $18,250 (not considering interest)
Now, let’s apply that 2.52% interest rate that Vio offers (considering monthly compounding):
This chart of progression is imperfect, as it considers $300 a month rather than $10 a day (the 31 day months equaling $310 deposits), but the concept is still illustrated.
The first year that $300 a month deposit earns about $50 in interest. Not bad.
The second year, the interest more than doubles since it increased the amount sitting in the deposit that interest is drawn on.
You can see that each year, the interest accrued grows about $100 and overall equals about $1200 extra dollars in your account after 5 years. This number would actually be a bit higher since that $50 per year from the months with 31 days is not considered in this chart.
As the amount grows higher and higher, the interest also grows more quickly and the overall amounts grow exponentially.
I love basic ideas like this. It’s a simple concept that everyone can follow and virtually anyone can do.
What would you do with an extra $20k?