How Investing Just $5 a Day Can Lead to Massive Wealth

Have you ever considered what skipping your daily Starbucks, cutting back on pricey Uber Eats, or resisting the temptation to buy new Fortnite skins could do for your financial future? If you took that $5 and invested it instead—earning an average annual return of 10%—in 45 years, you could have nearly $1.6 million.

I’ve shared this idea before, and while many people are amazed at how a small daily habit can turn into a fortune, I always get the same three hate comments:

1. “I don’t want to save. I want to enjoy my money while I’m young.”
2. “I don’t want to be a millionaire when I’m old and gray like you. I want it now.”
3. “What kind of investment actually gives me these returns over the long term?”

After hearing these doubts time and time again, I decided to put this to the test once and for all. That’s why I kicked off a year-long challenge to show that investing $5 a day doesn’t have to feel like a sacrifice and can lead to real, measurable returns. Let’s dive into how I set up my investments and fast forward to my results one year later.

Step 1: Choosing the Right Investment Platform

The first step is finding the right investment platform. If you ever want to try this challenge yourself, here are the non-negotiables to look for:

• Low fees – You don’t want unnecessary charges eating up your profits.
• Beginner-friendly interface – Investing shouldn’t feel overwhelming.
• Security – The platform should be fully protected by financial regulations.
• Low minimum deposits – Since we’re only investing $5 a day, we need a platform that allows small contributions.
• Automatic investing – Let’s be real, remembering to manually invest every day is not happening.
• Access to fractional shares – This allows us to invest in expensive stocks with just a few dollars.

For this challenge, I chose Trading 212, as it checks all these boxes.

Step 2: Opening and Funding an Account

One critical decision people often overlook is choosing the right account type. The type of account you use determines how much of your profits you actually get to keep.

There are two main types:

• General Investment Account (Taxable) – You’ll owe taxes on profits.
• Tax-Advantaged Account (ISA or Roth IRA) – Your profits grow tax-free.

I opted for a Stocks and Shares ISA to maximize my returns. If you’re in the U.S., a Roth IRA is a great alternative.

To show the process from scratch, I asked my son Curtis to set up an account and join the challenge. Once his account was ready, we deposited £35, enough to cover one week of daily $5 investments.

Step 3: Choosing Investments

Now, it’s time to decide what to invest in. We could pick individual stocks like Apple, Tesla, or Nvidia, but that’s risky. Instead, I went with index fund investing, which spreads risk across multiple companies.

For this challenge, I selected the Vanguard S&P 500 Index Fund (Accumulation Version). This reinvests dividends automatically, making the process seamless.

Step 4: Automating Daily Investments

Many people imagine investing daily is tedious. But the Auto-Invest feature makes it effortless and also leverages Dollar Cost Averaging (DCA).

DCA works by investing a fixed amount regularly, regardless of market fluctuations:

• When prices are low, you buy more shares.
• When prices are high, you buy fewer shares.
• Over time, these ups and downs balance out.

I set up my auto-investment to put £5 per day into my S&P 500 fund. If you prefer, you can invest monthly and still see great results.

One Year Later: The Results

I started this challenge in August 2023, and after one month, I was up £237 (a 1.5% return). But then, September hit, and I was down 79p (-0.5%).

Many people give up when they don’t see immediate results, but I stuck with it. Fast forward six months, and I was up £837—an 18.2% return.

After 12 months, my total profit reached £1,161.34, an 18.1% return. But I didn’t stop there. Let’s check the numbers today:

• Total Invested: £1,155
• Current Value: £1,972
• Total Profit: £467
• Rate of Return: 43.8%

Converted to dollars, that’s $576.59 in profit. Not bad for just $5 a day!

Final Thoughts

This challenge proves that time in the market beats timing the market. If I had panicked and pulled out in the second month, I would have missed out on these gains.

Of course, the stock market fluctuates, and past performance doesn’t guarantee future results. But historically, long-term investing in diversified funds like the S&P 500 has been a winning strategy.