Buy hope for $2.99?
|Can You Buy Hope for $2.99?|
Today I went shopping with my wife at the consignment shop. She wanted to check out some used furniture and I wanted to check my balance to see if I had money waiting for me.
We found a nice old dresser for the bedroom, but we did not buy it. It was a solid old unit, made with real wood and dovetail joints. But I decided to get rid of some of my clothes that wouldn’t fit in the closet instead of buying a dresser for more storage. This seemed like a good way to save some money and avoid buying yet another thing.
On the way out of the store, I saw something for sale at the check-out. There were some impulse items for sale with a sign that read:
I was intrigued. For one thing, I had $3.88 in my wallet, so I could actually afford to buy what they were selling. But how can you sell hope for $2.99?
I moved in closer to see what was in the packages that you could get for $2.99. I was disappointed to see that it was a package of rope. The sign actually said “Rope $2.99”.
|Is There Still Hope?|
Even though hope was not for sale as I had initially thought, I began to wonder... could you really buy hope for $2.99?
For this exercise, let’s assume that if you have some money that you have some hope for the future. If you were completely broke and started saving $2.99 every day, would this be enough to provide hope for a stable financial future?
Saving $2.99 per day adds up to about $90 per month. First, let’s look at how this would grow in a savings account.
If you put away $2.99 per day (round to $90 per month) you would have:
$5,400 after 5 years
$10,800 after 10 years
$21,600 after 20 years
$32,400 after 30 years
You would do a little better in a bank account at 0.85% interest:
$5,514 after 5 years
$11,268 after 10 years
$23,536 after 20 years
$36,891 after 30 years
If you really want to buy some hope for $2.99, let's try to find a better rate of return.
What if you invest the money in the stock market instead of a bank account? The stock market can go up or it can go down. Over the long term, the historical rate of return is around 8%.
Here's how your daily contribution of $2.99 would accumulate with a 8% rate of return:
$6,613 after 5 years
$16,465 after 10 years
$53,011 after 20 years
$134,132 after 30 years
You can check out these calculations yourself with my Saving Calculator. Just put in a $0 starting investment amount, set the monthly investment amount to $90, and set the interest rate for your investment scenario.
If you start buying hope soon enough, you could end up with some real money.
Not to dash your hopes, but there are some things we have not considered in the simple calculations above. Inflation over time tends to reduce purchasing power of your money in the future, so what looks like a lot of money in these calculations may not buy as much as you would think in the future.
Also, you will have to deal with taxes. One way to avoid paying taxes on a retirement investment is to contribute to a Roth IRA. You do not have to pay capital gains taxes if you follow rules that apply to withdrawals.
Buying hope for $2.99 seems like a pretty good deal. The best time to start buying hope was 54 years ago. The second best time to start is right now.