With interest rates at all-time lows, sticking your cash in a savings account is not going to result in becoming a millionaire in any reasonable timescale. Put simply, you’re going to need to find better returns in order for your wealth to reach millionaire status.
In fact, even if you managed to save a massive £1,000 per month and put that money into a Marcus savings account with 0.5% interest, even after 40 years you’d have around £530,000. That’s an increase of about £50,000 on top of what they put away. In total, whilst that’s not a small sum of money, neither is it the £1 million we’re after! Plus, most people can’t afford to save £1,000 per month.
By contrast, a savvy investor who manages to save just £300 per month and gets an average return of 8% from the stock market, would end up a millionaire over the same 40 year time period.
To illustrate, the comparison diagram below shows just how big a difference a higher return or interest rate can have on your funds. We see the savvy investor putting away £144,000 over the 40 year period. However, their money snowball this has created by investing, has accumulated an additional £900,000! That’s in comparison to the £50,000 increase the saver saw from putting away more than three times the amount each month.
Where and how you invest your money can be more important than how much you save.