How long does it take to save $100k?

How long does it take to save $100k?

Contributing $500 per month at an 8% return on investment will give you $100k in 11 years. You can achieve your first $100k faster by contributing more or finding a better return on investment. Most people have more control over their contribution amount than rate of return.

Imagine, saving your first $100k. You’ve done what a lot of people can’t and you’re well on your way to your first million.

Saving $100k is difficult, but it’s well worth it!

Luckily for you, I’ll show you how long it takes to save your first $100k. I’ll even show you how to reach it faster and why it’s good to have $100k invested. Investing gets way better after you hit this important milestone!

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How long does it take to save $100k

Starting from nothing, it would take you 11 years investing $500 per month at an 8% return on investment to save $100k. You can reach $100,000 invested faster by contributing more money or finding a better rate of return. Traditionally, the S&P 500 has an annualized average return of 10%.

Your first $100k is primarily all savings. Therefore, it is important for you to save every single penny until you get to $100k. After you reach your first $100k, you can slow down a little if you want.

If you contribute this much money every month: It will take you about this many years to reach $100k, depending on interest rate
5% 7% 10%
$100 33 28 23
$300 18 16 14
$500 13 11 10
$700 10 9 8
$900 8 7 7
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How hard is it to save $100k?

Saving $100,000 is the hardest financial goal for most individuals. Once you have reached your first $100,000, your Investments start to do more of the work. Additionally, you have already established the habits of saving money which can help you reach your next milestone.

Reaching your first $100,000 is the hardest, because it’s all about how much money you can save. Your investments do very little work building up your first $100k.

For example, you can invest your first $10,000 this year. Assuming a 10% return on investment, your investments would earn you $1,000. Once you reach $100,000, the 10% return on investment is now $10,000.

As you can see, your investments are now matching your contributions. You literally have to save your first $100,000 before compounding interest takes place.

Saving $10,000 per year is equivalent to contributing $833 per month. At 8% return on investment, you would reach your first $100,000 in about 7.5 years. Reaching $200k invested would take about 5.5 years.

The time for each $100k incremental investment shortens!

Additionally, most people that reach their first $100,000 have a good saving strategy in place. Most people can’t reach their first $100,000 invested because they can’t save money on a month-to-month basis.

Essentially, being able to reach your first $100,000 means you’ve made it. 

Is having $100k in savings good? 

Saving $100,000 is not only difficult to do, but it is an important first milestone. $100,000 invested typically returns $10,000 on average in interests. Therefore, your investments are going to start compounding with minimal input on your part. 

I’ve already talked about how your first $100,000 is going to start compounding. Your money is going to start making you even more money.

However, having $100,000 saved gives you peace of mind. You know that you can cover any financial emergency, even if it means dipping into your savings. 

Having $100,000 in savings it’s good for anybody at any age. However, the power of having 100K invested at 20 vs 50 can be life-changing. 

A twenty-year-old with $100,000 invested will be worth 3.6 million dollars by the time they’re 65. The 50 year old will have their $100,000 worth $330,000. The 20 year-old simply has more time to let their investments compound.

How can I save $100k faster?

To save $100,000 faster, you need to find a way of increasing your savings rate. The more money you can contribute to your investment portfolio, the faster it will build. Additionally, you can try and find a better return on investment which isn’t always possible.

Savings rate is the only thing that matters when you’re trying to reach your first $100,000. Savings rate is the ratio between how much money you invest compared to how much money you earn.

Earning $50,000 per year and saving $25,000 per year results in a savings rate of 50%. Someone who earns $100,000 per year and only saves $10,000 per year has a savings rate of 10%.

The $50,000 earner is able to save more money than the $100,000 earner. A $50k earner can have a larger investment portfolio then the 100K earner. Therefore, the $50k earner can retire much easier than the $100k earner.

So you need to find a way to increase your income and reduce your expenses. However, there’s only so much you can do to reduce your expenses. Eventually, you will need to focus on growing your income.

Some individuals decide to start a side hustle. A side hustle can greatly increase your income and allow you to reach your first $100,000 faster. You can either start your own business or take on part time work.

Other individuals look for greater returns on their money to reach $100,000 faster. For example, you can invest in real estate and use the bank’s money as leverage. You take on more risk and manage your own investment, but gain rental income and home appreciation.

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Summary: How long does it take to save $100k?

As you can see, it takes around 11 years to save $100k by investing $500 at an 8% return on investment. The interest rate and your contribution amount will determine how long it takes to save your first $100k. 

Your first $100k is always the hardest, because it’s primarily savings. After you hit $100k, your investments start to return enough money to do the heavy lifting. Every $100k increment after is easier and happens faster than the last.

Your savings rate is what determines how fast you save $100k. Savings rate is the ratio of how much you save compared to how much you earn. Try to keep your income high, but expenses low.