Hey there! Did you know that saving $5 a day adds up to $1825 saved per year? What would you do with that much money?
Here's the thing. You don't have to be a personal finance guru to understand that if you save money every day, you'll be much better off down the road. It won't make you wealthy, however, there are definitely some great benefits if you save $5 a day for a year and longer.
Start Saving $5 a Day
It's not much, but it adds up. “Now, just a minute, Bo; I like my expensive $5 coffee shop drinks!” you might say to me. That's fine. What else are you spending $5 a day on, or $35 a week?
Do you have an occasional drink out with friends or family? You could easily be saving $5 a day or more if you have one less drink when you go out or order in. Could you pack lunch instead of buying it?
Now don't get me wrong. Saving $5 a day won't make you rich. That's not the point. The only way that banking $5 per day will make you rich is if you were to invest it into the stock market for 40 years or more.
This is a long time and there are better ways to become a millionaire, with the most basic example being to save more than $5 a day. This would include investing as much of your paycheck each month.
That said, putting aside $5 each day can help you with other things. It will do things such as: develop savings habits, create an emergency fund, start a retirement fund, help you get out of debt faster, allow you to enjoy more special occasions (vacations for me) in life and more.
If you're creating an emergency fund, consider using a CIT Bank online savings account. They're my bank of choice for online savings and have been for years. With CIT Bank, you'll earn competitive interest rates on your money and the FDIC safely insures your money for up to $250,000.
In fact, if you save $5 a day for a year, you'll have $1,825, which could a long way. I'll talk about that below.
What You Can Do When You Save $5 a Day
If you're saving $5 a day for a month, you would have $150. Here are multiple great things you can do with $150:
- Buy a new outfit
- Upgrade your footwear
- Pick up a bike
- Grab the latest video games (and some of their add-ons!)
- Pay down some credit card debt
- Take your significant other out for an awesome dinner
- Get a week's worth of groceries without dipping into your grocery budget
Not so bad for a measly $5 a day. If you save $5 day for a year, you would have $1,825. Here are some things you can do with just shy of $2,000:
- Get a “free” month of rent
- Take a vacation
- Buy a new computer
- Pay down student loans
- Fund and start a side hustle
- Invest in an IRA
How to Build Wealth With Just $5 a Day
If you're not paying down debt, you could invest your $5 a day. Let's look at some examples where your money might be better off than simply in your bank account. Consider the below with the given rate of return.
If you saved $5 a day for 30 years and placed the $5 a day into a conservative mix with a 4% annual return, you would have roughly $105,846 after 30 years. In contrast, had you put that money under the mattress (or in a zero-percent yield checking account), you would only have $54,750. In this example, you would have an additional $51,096 after 30 years for investing in bonds, given an average yield.
If you were to invest your $5 a day into the stock market in a tax-deferred account such as a Roth IRA, you could fund a sizeable nest egg for retirement. In fact, if you were to invest $5 a day in S&P 500 Index Funds, you could have just over $280,000 after 30 years, which is a lot more than the $54,750 that you invested at $5 a day for 30 years.
You can see that when you invest $5 a day, those small amounts add up in the long term. If you're looking for an easy way to invest, check out M1 Finance and get started with automated investing to reach your financial goals faster.
Investing $5 a Day Example
You can see from the above table, that even saving $5 a day for 10 years in an S&P 500 index fund could net you over $11,000 more than if you simply put the money into a checking account with no interest. This is how to make money with only $5 a day.
This is the wonders of compound interest. You can see not spending $5 a day on an expensive cup of coffee can really add up given how compound interest works.
While you might not make a million dollars while saving $5 a day (although you could!), you can use the money to start investing sooner than later. With a larger amount of money, your investment strategy could make you a millionaire into retirement.
That said, if you were to save $5 a day from the time you were age 18 until the time you turned age 65, you would, in fact, have saved over $1,000,000. And you wouldn't need to make a lot of money to earn that cool million. Simply investing a steady $5 a day each day from the time you were age 18 to age 65. That's amazing! Give your kid a million dollars over the course of their lifetime by teaching them to invest $5 a day as early as they can.
By investing for the long term, you build wealth naturally and safely, which will help you secure a financially healthy retirement.
Investing $5 a day is a great first way to ascend the 7 steps of financial freedom.
How to Save $5 a Day
A friend of mine lives on a somewhat minimum budget, and I asked him what he thought about saving $5 a day. He expanded upon it and said telling people to save $150 a month is asking a lot for some people.
We debated on this topic and the common ground was that most people could cut out one thing in their life which could, in turn, save them $150 per month if not $5 each day. This can be done through effective budgeting. You can read my full detailed guide on budgeting and how to track your spending here.
And you know what? Maybe it is for some people. So, if you can't save $150 a month, how about $50 or $20?
But, focusing on $5 a day, here are four examples that can help you save it and more.
1. Make Your Own Breakfast
A lot of people get breakfast at a restaurant or on the go, such as at a Mini-mart (I know I sometimes do). This can easily be $3-$5 every day. Spend a few extra minutes at home and make something.
Oatmeal takes a few minutes, as does a bowl of cold cereal. Have some spare time? Make eggs.
2. Cut Back On Soft Drinks and Energy Drinks
Soda can cost $2 per bottle, and energy drinks can cost more. This has an added benefit that it's good for your health to drink less soft drinks and energy drinks.
Speaking of energy drinks, I am rather obsessed with energy drinks. In 2019, I cut back my energy drink intake by 50% and starting buying the less expensive ones. I ended up saving around $120 per month in energy drinks alone!
3. Learn to Cut Back On Living Expenses
Do you have subscriptions that you don't use? Are you overpaying for cable? Cancel subscriptions that you no longer use. Go through the process of lowering your monthly living expenses.
Through canceling unused subscriptions, negotiating my cable bill, and switching some service providers, my wife and I saved over $200 a month.
4. Pay Down High Interest Credit Cards
The higher your balance on a credit card, the more interest you'll pay each month. While it's best not to carry a balance, life happens. By paying down (if not paying off) a credit card, you'll have less expense coming from interest.
Another way to lower your credit card payments is to get a personal loan to pay off your credit card. With a personal loan, you can often get a much lower interest rate, and get terms to make payments more affordable.
5. Eat Out Less to Save $35 Per Week
The average person spends over $3,000 eating out every year. You and your significant other may spend over $35 a week on a single meal out when you include food, drink, tax, and tip. Eating out one less time per week will save you an average of $5 a day.
When you eat out less, you'll need to shop smart for groceries. I use Ibotta, a free app that lets you shop at hundreds of grocery and retail stores at a discount. Ibotta also daily deals where you can save big on common household items.
6. Cut Back On Your Heating Bill
In the colder months, my wife and I have saved over $300 per month by turning the thermostat down and wearing an extra layer of clothing. If you're hurting for cash or looking to save, this method of saving can save you well over $5 a day.
Other ways to save on the heating bill is to seal up windows and doors to ensure less heat escapes your home, which puts less stress on your heating system.
How to Make $5 a Day
So how can you get $5 right now? If you can't cut back $5 a day, can you make $5 more every day? This might be easier than you might think. A simple side hustle could easily add up to $5 a day, or $150 per month. I had a few side hustles in college that gave me spending cash.
In this side hustle culture, it shouldn't be too hard to make $5 more per day. That extra $150 per month could go towards your credit card debt or student loan payments. It also could go to your emergency fund, which is best fit in a high interest savings account, such as a CIT Bank online savings account, or it could go in your retirement accounts.
If you want to make a quick $5 per day, I highly recommend taking online surveys. You can check out sites like Swagbucks or Survey Junkie to get started. If you want more information on how to earn $5 a day, I wrote a Swagbucks review and a Survey Junkie review that will answer all of your questions. You can earn $5 fast and earn extra cash with online surveys.
If filling out surveys isn't your thing, I detailed an entire post on how you can make money online, which can easily earn you $5 a day, if not much more.
What is the Save $5 a Day Challenge?
The save $5 a day challenge is my take on the original save $5 challenge. The save $5 challenge is whenever you have a $5 bill, you put it into your savings account. Over time, saving every $5 bill that you have will add up to an enormous amount, which can be great for an emergency, or something more fun like for travel or for a major purchase.
When you do the save $5 a day challenge, you make it a point to save or invest $5 every day. You essentially pay yourself daily by creating a $5 a day savings plan. Saving $5 a day to become a millionaire is possible, though it will take most of your life. If you have children, teach them the importance of saving and investing money; even if it's only $5 a day.
Wrapping It Up
As you can see, saving an extra $5 a day goes a long way. I encourage you to take the $5 a day challenge and save $5 a day, as many days as you can. Aside from having more money, you'll also increase your savings rate, which means you'll have saved more of your income each month.
Be sure to comment on ways you've found to save $5 or more a day in your everyday life. For now, save smart!
What do you think about this debate? Is $5 a day worth your time, or should you find better savings wins?