How much is 20 years of one free lunch a week actually worth?

This blog topic may be silly, but it highlights the very serious idea that small amounts of money really add up when it comes to investing long term. Little money now is big money later.

So, lean in Big Money (but like, not in the Sheryl Sandberg just grind harder kind of way), let’s talk about how much one free meal per week for 20 years could be worth when you reach retirement age.

The Assumptions

We will start with $0 invested.

We will pretend you are young and have a 40-year time horizon to invest before retirement.

We will assume the cost savings are $20 per meal for the entire 20-year time period.

We will also assume the $20 is invested weekly.  

We will assume the money is invested in a total stock market index fund such as VTSAX or FSKAX. We will use 7% for our annual rate of return because this is the average stock market return after factoring in inflation.  

The Math

After 20 years of investing $20 per week, you would have (drum roll please!) a total of $42,635.

Of this, you would have only contributed $20,800 (less than half!) of the total amount. That is almost $22,000 in gains.

Now let’s assume that you leave the $42,635 to grow for another 20 years. You don’t contribute any additional funds but you don’t make any withdrawals either. We will pretend you make it to middle management and decide you don’t want to snoop around conference rooms for lukewarm trays of rice and beans anymore.

You would have nearly $165,000 come retirement age. Just from investing $20 per week for 20 years and leaving that money in the market for another 20 years. Compound returns are truly bananas.

Time is the most important factor when it comes to investing. Even small amounts of money are worth it! If you can only invest a couple hundred dollars per month but you are in your 20s or 30s, that small amount could mean the difference between a comfortable retirement or living social security check to social security check in your 60s, 70s, and beyond. Do not underestimate the power of time my young friends!

The Takeaway

Scavenge away! Find free pizza in college at campus events. Get that corporate catered lunch when you go into the office. You could have hundreds of thousands of extra dollars in retirement if you find just one or two free meals per week and invest the difference!  

The true takeaway— invest whatever amount is feasible for you. Know that small amounts are meaningful and add up to more than you probably think!

If you want to see how much your investments will be worth, try playing around with a compound interest calculator. This is my favorite one.