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How Much You Should Invest By Age
The sooner you start, the easier it is.
Matthew Du
October 22, 2023
It’s fun to think about retirement. But how much is enough? Let’s figure it out.
In today’s edition, we’ll go over:
The average Filipino net worth. 🧧
How much the top 1% have. 🤔
How much you should invest by age to have PHP 50 million by 65. 🤫
TLDR;
The Bottom Line
If you start investing PHP 13,500 per month at 23, then you will have PHP 50 million by 65. This assumes an annual stock market return of 8%. 📈
Save more money by buying in bulk, getting takeout, and opening a high yield savings account. 🛍️
Maya’s new promo gives users up to 14% annual interest rate (up to October 31, 2023). 🤑
The content
How Much You Should Invest By Age To Have PHP 50 million by 65
Photo by Afif Ramdhasuma on Unsplash
Assuming that the average rate of return on long-term investments is around 8 percent annually, here’s a breakdown of how much you’ll need to invest each month to get to that goal, depending on where you are in life. (Source: calculator.net)
Age 23: PHP 13,217.27
Total contributions: PHP 6,661,504.12
Total interest: PHP 43,338,495.88
Age 30: PHP 23,336.49
Total contributions: PHP 9,801,324.47
Total interest: PHP 40,198,675.53
Age 35: PHP 35,497.48
Total contributions: PHP 12,779,093.75
Total interest: PHP 37,220,906.25
Age 40:PHP 55,006.05
Total contributions: PHP 16,501,814.30
Total interest: PHP 33,498,185.70
Age 50: PHP 148,101.50
Total contributions: PHP 26,658,270.12
Total interest: PHP 23,341,729.88
If you want to save PHP 50 million by the time you’re 60, this is the amount that you’ll have to save and invest each month.
Now, do you need that much money? Of course not, as only the top 0.1% of Filipinos have this much money.
A 2023 Credit Suisse Report highlights that in 2022, the average Filipino had a net worth of $14,486 USD (roughly PHP 824,579.34) with a median of $3,155 and $1,231 USD in debt. The top 3% of Filipinos have a net worth of at least $100,000 USD, with the top 0.1% having >$1 million.
Only 39 Filipinos have a net worth of over $500m USD; the United States has 1,583.
It’s fun to think about, right?
Notice how, as you start investing later in life, your total contribution starts to take up a larger percentage of your first million.
This is because those who start earlier in life can take advantage of compound interest. This is basically the interest you earn on your interest.
Source: Tenor
If, for example, you invest Php100 that increases 6% this year. By next year, your starting principle would be Php106 — even though you only actually contributed Php100.
As time goes on, your monthly capital increases, and the interest you’ve earned from previous investments will only grow more.
Actionable Advice
How To Save The Amount You Need
The items below will maximize the returns of what you already do and the accounts you already have. Let’s go.
Open a high-yield savings account.
A high-yield savings account is a specific type of savings account that pays higher-than-average interest rates on deposits.
A high-yield savings account can help your balance grow faster over time without any additional effort on your part.
I use Maya’s high-yield savings accounts, which currently provide me an annual percentage yield of 3.5%. For comparison, the national savings average is around 0.43% APY.
Their current promo allows users to get as much as 14% annual interest on their first Php100,000.
That said, Maya isn’t the only online bank that provides a high-yield savings account. Make sure to take note of any sign up bonuses that you should take advantage of.
Alternatives to high-yield savings accounts include money market accounts, certificates of deposit, and checking accounts.
Buy in bulk
If you know you’re using something daily, buying in bulk is usually cheaper. Think about it this way, if you save Php100 on something you use daily, that’s Php 36,500 in yearly savings.
Apart from being cheaper, buying in bulk also:
Saves time: less shopping trips
Reduces wastes: reduces packaging materials
Ensures you have supplies: less likely to run out of supplies
Takeout (when it makes sense)
Look, we know that doing grocery is generally cheaper than doing takeout. You pay anywhere between 50 to 150 pesos a meal if you buy the items to cook at home. Takeout can be anywhere from 200 to 500 pesos a meal, depending on where you eat.
Source: Tenor
I think cooking home-cooked meals make sense when you’re looking to cook a huge batch of home-cooked meals in one go (preferably on a Sunday) and then living off of microwaved meals for the rest of the week.
Unfortunately, I doubt anyone would be fine with eating microwave food and leftovers every day of the week.
When you need to make a home-cooked meal from scratch every day, I’d argue that the time spent creating those meals every day from scratch would have been better invested in revenue-generating activities.
If you make Php 500/hour, then wouldn’t it make more sense to spend Php 150 on good takeout?
Stuff Worth Sharing
The Link Lowdown
The Global Wealth Report - The Union Bank of Switzerland publishes a global wealth report where it breaks down the average net worth for each country and how much you need to be part of the top 1%.
Maya’s new High Interest Savings promotion - probably a good time to start an account with Maya. New users can get up to 14% p.a.