Small Savings Can Change Your Life

Did you know that saving small amounts of money each day can change your life down the road? Oftentimes, we never think to spend a few dollars on coffee, tea, or a soft drink.

But those $5 coffees add up faster than you might think. Now, before I get started, I'll address something right off the bat. Some of us need our coffee. I know I do.

Saving money is a choice we all make. Do you buy the expensive $5 coffee or spend a few minutes at home each morning and make it yourself, generally for less than a quarter per cup, if you use a coffee maker and coffee grounds from a big container.

I'll talk about a few ways how you can save small amounts of money. Let's jump right in.

Start Off With Small Savings

When you start off saving money, try to focus on saving $5 a day. Saving $5 a day can be relatively simple. Here are some ways you can do that:

• • Make your own breakfast
  • Make your own coffee
  • Go out to eat one less time per week
  • Cut back on living expenses, such as negotiating your bills
  • Pay down high interest credit card debt

With some quick math, you can see that saving $5 a day is the same as saving $150 per month, or $1825 per year. These are no small numbers, are they?

How Much Does Saving $5 a Day Add Up to?

You'll save $1825 per year when you pocket $5 a day each day. But what happens when you invest $5 a day instead of simply saving it? Assuming you invest your $5 a day into an index fund that yields 9% annually per year. Here's what you'll have down the road:

• • 10 years later: $29,591
  • 20 years later: $102,368
  • 30 years later: $281,349
  • 40 years later: $721,523
  • 50 years later: $1,804,057

It's amazing how the money adds up. Can you imagine teaching your 15-year old teenager to start saving $5 a day? They'd have over $1.8M when they became age 65.

Ramping up Your Savings

Saving $5 a day is easier on paper than, say, trying to save $10,000 in a year. Saving $10,000 in a year equates to saving, on average, $27.40 per day or $833.33 per month.

To save this much money, I recommend some of the following:

• • Create a tight budget and track your spending
  • Continue to lower your monthly expenses
  • Cancel all subscriptions that you aren't using
  • Have regular no-spend days

The trick to maximizing your savings is to chip away at several smaller things to add up to one larger amount saved. If you spend $10 a day on lunch at work, then you're already saving over $2000 a year (assuming you work five days a week) if you bring your own lunch.

Wins that you might not necessarily think about is paying off a car or even buying a pre-owned car versus a new car. In fact, you're likely to save over $150 per month when you buy a comparable pre-owned car versus buying a new car if you were to finance either.

The Value of $10,000 Saved Over Time

What if you could save $10,000 in a year and then invest that money? How much would your $10,000 be worth down the road, assuming you never saved another dollar again? Before you buy that brand new car for $30,000, could you buy a certified pre-owned car for $20,000 and save $10k? Here's the breakdown of $10,000 invested at a 9% return.

• • 10 years later:$23,673
  • 20 years later: $56,044
  • 30 years later: $122,676
  • 40 years later: $304,094
  • 50 years later: $733,575

A practical look at this shows that if you saved $10,000 just once when you were in your 20s, you would have hundreds of thousands of dollars in your retirement.

Wrapping It Up

Whether you save a lump sum once or if you try to save little bits here and there, I hope I've convinced you to try to save money, even if it means making coffee at home or skipping going out to eat once a week. Even small savings go a long way when you stretch it out over decades.

What do you do to save money regularly?

Dave Bochichio is a personal finance blogger who writes at The Dollar Blogger. When he's not writing about money, he enjoys spending time with his wife and two cats.