4 min read

Pretend this tiny circle represents $50 in monthly savings:

It looks insignificant by itself. But if you consistently save that same $50 each month, you can save $600 over the course of a year:

That’s pretty good. Not life changing.

If you save $50 each month and invest it at a 7% interest rate for 10 years, it will blossom into nearly $8,300:

That’s a decent chunk of cash.

Do this for 20 years and it will turn into $24,600:

Okay, that’s actually pretty exciting.

Do this for 30 years and these savings will transform into an impressive $56,700:

**That’s a significant amount of money.**

# The Math

### The 10-year savings timeline

There’s some cool math behind these numbers. Assuming a 7% interest rate, your monthly savings will be worth about **166 **times as much in 10 years.

For example, if you save $50 per month, you can save $600 per year. Invest this $600 each year for 10 years straight and you’ll have roughly **166** times as much as your monthly savings:

**Monthly savings:** $50

**Total Value in 10 years:** $50 * **166** = $8,300

This works for *any* amount of monthly savings. Suppose you save $200 per month instead:

**Monthly savings:** $200

**Total Value in 10 years:** $200 * **166** = $33,200

### The 20-year savings timeline

The same type of math applies to a 20-year savings timeline. Your monthly savings will be worth about **492 **times as much in 20 years. Here’s an example of saving and investing $50 per month for 20 years:

**Monthly savings:** $50

**Total Value in 20 years:** $50 * **492 =** $24,600

### The 30-year savings timeline

Again, the 30-year savings timeline can be boiled down to one number. Your monthly savings will blossom into a total value of roughly **1,133** times as much in 30 years. Here’s an example of saving and investing $50 per month for 30 years:

**Monthly savings:** $50

**Total Value in 30 years:** $50 * **1,133 **~ $56,650

# Knowledge is Power

Knowing this math helps us understand the importance of monthly savings. Even tiny adjustments to monthly savings can make *massive* differences over time.

Suppose you currently save $100 per month. If you can cut your spending by $100 each month and use a side hustle to earn an extra $100 each month, you can start saving a total of $300 each month.

The difference between saving $100 and $300 each month doesn’t sound life-changing, but over the course of two decades it can be. Here’s what a $100 monthly savings invested at 7% interest will be worth in 20 years:

Compare that with a $300 monthly savings, invested at 7% interest over 20 years (brace yourself):

That’s almost a difference of $100,000.

**Don’t underestimate the power of increasing your monthly savings even by a few hundred dollars. 🙂**

My favorite free financial tool I use is **Personal Capital. **I use it to track my net worth, manage my spending, and keep an eye on my monthly cash flow. It only takes a few minutes to set up and it makes tracking your finances simple and easy. I recommend trying it out.

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