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.
Our Picks for the Best High-Yield Savings Accounts of 2024
SoFi Checking and Savings 
APY up to 4.60% Rate infoYou can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet. Open Account for SoFi Checking and Savings Member FDIC. | APY up to 4.60% Rate infoYou can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet. | Min. to earn $0 |
Barclays Online Savings
Open Account for Barclays Online Savings Member FDIC. | | Min. to earn $0 |
American Express® High Yield Savings
APY 4.25% Rate info4.25% annual percentage yield as of May 29, 2024 Open Account for American Express® High Yield Savings Member FDIC. | APY 4.25% Rate info4.25% annual percentage yield as of May 29, 2024 | Min. to earn $1 |
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 put $200 monthly into a high-yield savings account and earn interest as you work to build an emergency fund. Another option is to contribute to a tax-advantaged account, like a traditional IRA, which could be a good move if you want to focus on long-term growth as you plan for your retirement years.
Is saving $$200 a month enough? ›
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.
How much is $200 a month for 4 years? ›
Answer. Using the present value of an annuity formula, a $200 monthly payment over 4 years at 4% annual interest allows for a loan amount of approximately $8,442.42. Therefore, with a $200 monthly payment, you can afford a loan of approximately $8,442.42 over 4 years at a 4% annual interest rate.
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.
Is investing $200 a month good? ›
If you were to invest $200 per month over the course of the next 30 years, that would equate to a total investment of $72,000. That's significant, but it's through the effects of compounding that would get your portfolio to a more than $1 million valuation.
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 saving $300 a month good? ›
Putting aside $300 per month by the age of 39 could set you up to be a millionaire by the time you retire. Investing in exchange-traded funds is a good way to minimize risk and simplify your overall investing strategy.
How much is $300 a day hourly? ›
$300 daily is how much per hour? If you make $300 per day, your hourly salary would be $37.50. 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 much is $500 a day per hour? ›
$500 daily is how much per hour? If you make $500 per day, your hourly salary would be $62.50.
How much will I have if I save $1000 a month for 20 years? ›
Investing $1,000 a month for 20 years would leave you with around $687,306. The specific amount you end up with depends on your returns -- the S&P 500 has averaged 10% returns over the last 50 years. The more you invest (and the earlier), the more you can take advantage of compound growth.
Having a plan for your savings account is key to managing and growing your finances. 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 saving $1000 a month good? ›
Saving $1,000 per month can be a good sign, as it means you're setting aside money for emergencies and long-term goals. However, if you're ignoring high-interest debt to meet your savings goals, you might want to switch gears and focus on paying off debt first.
How much do I need to save a month to get to 10000? ›
To reach $10,000 in one year, you'll need to save $833.33 each month. To break it down even further, you'll need to save $192.31 each week or $27.40 every day. These smaller chunks are much more realistic and simple to comprehend, making it easier to track your progress.
How much is $200 a month? ›
If you make $200 per month, your Yearly salary would be $2,400.
Is 200 dollars a lot of money in the US? ›
$200 can get you 209L of milk, 1667 kWhr of electricity, or about two months of public transit in a major city like LA or Chicago. In the grand scheme of things, it's not a lot of money. The median income for a full-time worker is $936 per week, so $200 is just slightly more than one day's work.
How much money do I need to invest to make 200 a month? ›
Those who are able to save a significant amount beyond their retirement account contributions may be able to generate $200 monthly in interest. “If you have $50,000 in a high-yield savings account offering 5% APY, that's $200 a month right there,” Henry says.
What if I invest $$200 a month for 20 years? ›
Investing as little as $200 a month can, if you do it consistently and invest wisely, turn into more than $150,000 in as soon as 20 years. If you keep contributing the same amount for another 20 years while generating the same average annual return on your investments, you could have more than $1.2 million.
Is saving $500 a month good? ›
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.
What is the average monthly savings? ›
Source: NerdWallet survey conducted online March 30-April 3, 2023, by The Harris Poll among 2,035 U.S. adults. Savers say they typically set aside $985, on average, in a normal month, according to the survey. The median amount reported is $250.
Is saving 400 dollars a month good? ›
In fact, if you sock away $400 a month over a 43-year period, and your invested savings generate an average annual 10.5% return, then you'll end up with $3.3 million. And that should be enough money to enjoy retirement to the fullest.
