Here's how $10 a day turns into $1.12 million

Calling all young people! Stop what you're doing and consider this: Investing in the stock market has proven to be the best way to grow your wealth but it's not going to happen by investing solely in blue chips like BHP Billiton Limited (ASX:BHP), National Australia Bank Ltd (ASX:NAB) and Qantas Airways Limited (ASX:QAN).

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Maybe it's a Generation Y thing, or maybe it's me.

But it seems too many young Australians have a real problem with saving money. We just can't do it.

I know from experience, it's not cool to save your money by taking your own lunch to work or buying a plain t-shirt for $10, instead of spending $70 on the branded variety.

But buying a brand new car on finance, or taking a minority interest in a highly leveraged first home, makes perfect sense.

However saving doesn't have to be 'too hard' and boring. In fact, just by saving and investing $10 per day now, you could retire early with over $1.12 million! I'd say that's cooler than a $70 t-shirt.

And $10 isn't much money nowadays, anyway.

It could be saved on two large coffees or maybe the difference between a packed lunch or take-away lunch. I'm sure many young people could find a way to do it.

How does $10 turn in $1.12 million?

Let's say you take your $10 per day, and invest in the stock market (reinvesting the profits). The Australian stock market has, since January 1900, produced an average annual return of 12%.

After 32 years, the total value of your money would be $1,112,694, if you achieved a 12% return, compounded annually.

If you're a 25-year-old woman reading this, it could mean retirement well before 60 years of age.

But let's say you have to wait five years to start saving and investing. Your money would be worth $618,215. Still a healthy chunk of money, but unlikely to be enough to enable you to retire as early as your clever friend.

Stocks to get you there

The cornerstone of this simple theory is saving.

But the investing component is arguably more important.

Buying the same old stocks like Qantas Airways Limited (ASX: QAN), National Australia Bank Ltd. (ASX: NAB) and BHP Billiton Limited (ASX: BHP) isn't likely going to prove a winning strategy.

Indeed many investors have come and gone trying to achieve a 12% average return per year.

However, one investor who has achieved a return FAR better than 12% is Warren Buffett. Young investors everywhere should take a leaf out of his book.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.  

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »