Thursday, March 24, 2011

The Future Value of $1

I wrote a post a little while ago about saving as much as you spend. At the end of the post, I said that there might be a challenge coming up. I'm thinking May would be a good month for that. In the mean time, I'm working up some rules for myself and my family for this challenge. I think this would be a wonderful way to boost our savings for our Emergency Fund and/or retirement savings.

On strategy that I will be using is the coupon. Say I have a coupon for 50 cents off an item that I would typically buy in the grocery store. When I use this coupon, I save 50 cents off the price of the item, but it is not really 'saved' (yet). I will then log onto my online banking system and transfer that 50 cents (it would have been spent anyway) to either the E-Fund or RRSP account.

This is going to take practice for me. The months of March and April will be practice months for some of the strategies that I want to use for the challenge. I must practice them first, to see if they are actually viable strategies, and to reduce my forgetfulness factor, kwim? :)

Two fifty cents' off coupons equals one dollar for our future.

One dollar may not seem like a lot. Or does it?

I have about 26 years until retirement. $1.00 invested at 8% for 26 years will be worth $7.00.
So for the use of two fifty cent coupons, and a little discipline to transfer the money (and a little luck on getting the 8% interest rate), my dollar will become seven.

I cannot speculate on what my average interest rate will be over 26 years until retirement, but even if it's only 3%, my dollar will be doubled. Imagine if it averages 15%? My dollar will then be worth $37!!

What if I could manage to save (actually put money into savings) $10 per week?
$10 X 52 weeks = $520.00
$520 @ 8% X 25 years = $3,561 ( I put 25 years cuz it'll take me one year to come up with the $520 )

D'you see how a little sacrifice on my part could benefit future me?
Here's to a couple of months practice for our upcoming challenge. Please let me know what you think!
Comments are always appreciated!


  1. The interest would actually be compound. So if you saved $520 per year for 25 years with an 8% return, you would actually have $38,015.09. Not too shabby.

  2. thank you for a great reminder!