Saving is a financial goal for many Americans. But when you only have so much extra cash left over after paying all your living expenses, saving may feel impossible. Don't let your current financial situation keep you from saving. Even a small amount of money saved can add up. Setting aside $200 per month is an excellent place to start.
Here are two ways you can put $200 per month to great use as you work to reach your financial goals.
1. Earn free money as you establish an emergency fund
A solid emergency fund can save the day when you must cover an unexpected cost. If you don't yet have an emergency fund, it's never too late to start building one. By contributing $200 each month, your fund will add up throughout the year -- $2,400 is a solid amount of cash.
Since most checking accounts don't earn interest, keeping your extra funds in a savings account is smart. One option is a high-yield savings account. Many of the best high-yield savings accounts offer annual percentage yields (APYs) of 4.5% or more. With this type of account, you can access the funds at any time without penalty.
So, how much extra cash can you earn from interest as your cash sits in the bank? If you keep $2,400 in a high-yield savings account with a 4.5% APY for one year, you'll earn around $108, depending on how frequent the interest is compounded. That's much much better than earning $0 by keeping it stashed in your checking account.
Your balance will grow if you continue to put $200 per month into your account. You'll also benefit from compound interest, which is interest earned on interest. This could be an excellent way to put $200 per month to good use as you work to improve your finances.
2. Focus on long-term growth by investing your extra cash
Another option is investing. However, you should know there's no guaranteed return when investing your money. You'll need to be comfortable taking risks and remember that returns can fluctuate. But investing can produce good returns. Over the last 30 years, the stock market has had an average annual return of around 10%, as measured by the S&P 500.
Investing using a tax-advantaged retirement account could be a good option if you already have a sizable emergency fund. One option is a traditional IRA account. With this type of account, your contributions may be tax deductible. Plus, your earnings won't be taxed until you take a distribution. You can open a traditional IRA with a brokerage firm.
Are you wondering how much your money can grow as you invest your extra cash to save for your retirement years? Let's imagine you decide to invest $200 per month for the next 30 years. Here's a look at the potential account growth after 10, 20, and 30 years with an 8.5% annual rate of return using the compound interest calculator from Investor.gov.
| Time Invested | Total Money Invested | Estimated Total Balance |
|---|
| 10 years | $24,000 | $35,604.24 |
| 20 years | $48,000 | $116,104.83 |
| 30 years | $72,000 | $298,115.34 |
Data source: Author's calculations
Don't delay saving for your future
It's never too late to start saving for the future. Whether you choose to put your savings toward building an emergency fund or focus on long-term growth by investing for retirement, your future self will be glad that you prioritized your personal finances. Even if you can only afford to set aside $200 per month -- it's worthwhile to get started now.
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FAQs
You can save for the future, even if you can only afford to set aside $200 monthly. You can put $200 monthly into a high-yield savings account and earn interest as you work to build an emergency fund.
What can I do with 200 a month? ›
Saving £200 a month allows you to make progress towards your financial goals. Whether it's saving for a specific purchase, funding a vacation, or building your retirement savings, consistent saving helps you move closer to achieving these milestones.
How much is enough to save per month? ›
At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
How much is $200 a month for 2 years? ›
If you saved $200 a month for 2 years, you would have saved a total of $4,800 ($200 x 24 months).
What is a good dollar amount to save each month? ›
This budgeting rule states that you should allocate 50 percent of your monthly income for essentials (such as housing, groceries and gas), 30 percent for wants and 20 percent for savings.
How much will I have if I save $200 a month? ›
If you don't yet have an emergency fund, it's never too late to start building one. By contributing $200 each month, your fund will add up throughout the year -- $2,400 is a solid amount of cash. Since most checking accounts don't earn interest, keeping your extra funds in a savings account is smart.
Is 200 a month in savings good? ›
Saving $200 a month is sufficient and effective for those who don't have a lot of financial power to start building a second source of income, if the author of this project is educated enough financially, in 4 years, this source of income could provide him with a salary equal to or greater than that of his job.
Is saving $500 a month a lot? ›
Saving $500 a month is an excellent starting point. Yes, it's ambitious, but it's achievable and will set you up financially over time.
Is $500 a month good enough to save? ›
The short answer to what happens if you invest $500 a month is that you'll almost certainly build wealth over time. In fact, if you keep investing that $500 every month for 40 years, you could become a millionaire. More than a millionaire, in fact. Investing is about buying assets you believe will increase in value.
Is saving $600 a month good? ›
But when it comes to what they need to be saving, it depends. So, if we're starting with a 30-year-old, they should be probably saving close to $580, $600, at least, a month. And that's if they're going to earn a high rate of return. So it depends on how aggressive and risky that they're looking to be.
Living on a budget of $1,200 is doable but a bit difficult. It would depend on where you live (touristy beach areas tend to be more expensive overall), how much your rent is, and what your lifestyle is. If you shop and eat out like a local, you can live cheaply.
How much is $200 a day hourly? ›
$200 daily is how much per hour? If you make $200 per day, your hourly salary would be $25. This result is obtained by multiplying your base salary by the amount of hours, week, and months you work in a year, assuming you work 40 hours a week.
How to live on 200 a month for food? ›
Here are the most important habits that we regularly used to spend no more than $200 a month on food.
- Create a weekly perishable food inventory. ...
- Plan a menu each week. ...
- Focus on buying loss leaders. ...
- Find the markdowns. ...
- Buy in Bulk. ...
- Avoid processed foods.
In terms of savings accounts specifically, you'll likely find different estimates from different sources. The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
How much to save by age? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
How much money will I have if I save $100 a month? ›
If you save $100 monthly for an entire year, you'll have $1,200 in the bank. But if you keep your savings in a savings account, you'll also earn interest. After one year of keeping $1,200 in a high-yield savings account with a 4.5% APY, you'll earn $54 in interest.
How much is 200 everyday for a month? ›
Annual / Monthly / Weekly / Hourly Converter
How much is your salary? $200 daily is how much per month? If you make $200 per day, your Monthly salary would be $4,333. This result is obtained by multiplying your base salary by the amount of hours, week, and months you work in a year, assuming you work 40 hours a week.
Is $200 a day a lot of money? ›
While $200 a day may not seem like a lot of money compared to what some people make, it can add up quickly over time. If you're able to make $200 a day consistently, that's $6,000 a month or $72,000 a year. For many people, this is a substantial amount of money that can make a significant difference in their lives.
Can you survive on $2000 a month? ›
“Retiring on $2,000 per month is very possible,” said Gary Knode, president at Safe Harbor Financial. “In my practice, I've seen it work. The key is reducing expenses and eliminating any market risk that could impact your savings if there were a major market downturn.
