How Saving $8 A Day Can Make You A Millionaire

Full disclosure: Right now, I have three retirement accounts that I pretty much ignore. One is from my current job at Refinery29. I set it up as soon as I qualified for enrollment, checked the box that allowed me to contribute the full amount, and promptly forgot the login info. I never even bothered to think about it until Priya and I started working on the Money Challenge over the summer, where on Day 10, we recommend you increase your allocations. The other two accounts are from past jobs, though there isn’t enough saved to make me feel confident that I can retire when I’m 65. Every time I see Priya, she brings up these accounts and how important it is that I roll them over. Every time, I promptly change the subject.

I know I am not alone in my ambivalence toward retirement savings. 401(k)s are confusing. How do they work? What should I invest? How much? Should you have another retirement account like a Roth IRA on top of your company account? What the hell is matching? And why do my eyes glaze over every time I try to read an article about the right way to save for retirement?

I get it. It’s boring. And worse, it’s confusing. But that’s not a reason to not contribute. And yeah, it’s not the same instant gratification as buying a new pair of boots, but with some careful planning, you can save for the future and have some fun. (Also, let’s stop falling into the stereotype that millennials never think ahead and prove those old fogies wrong.)

When Priya and I started talking about this story, we tried to figure out how to make it interesting. And then, she presented me with the numbers — how much money you’ll make if you start investing in your 401(k) right this minute — and I just about fell out of my chair (and finally increased my allocation). If Priya’s numbers don’t convince you, I give up.

We made the following assumptions:

You’re 28.

You make $50,000 per year.

Your company matches 100% of the first 6% of your salary that you deposit into a 401(k) (more on what this means shortly).

Your portfolio will have an 8% annual growth over the course of your lifetime.

Option 1: You contribute 6% of your salary to qualify for the entire employer match = you contribute $3,000 and your employer contributes $3,000.

At 65, you will have $1,218,421.92.

Option 2: You contribute the maximum to your 401(k) = $18,000, of which the first 6% were matched dollar for dollar by your employer for a total of $21,000.

At 65, you will have $4,264,476.72.

Even if your employer isn’t matching your contribution, if you invest 6% of your salary into your 401(k), you’ll have more than $600,000 in the bank by the time you hit 65. And that assumes you never ever get a raise.

We’re talking a million dollars, people.

I asked Priya for help explaining all the confusing terms that trip me up when I’m trying to understand why and how I should invest my money in a retirement account. As usual, she was unfailingly patient and never once rolled her eyes when I asked a dumb question. She’s as passionate about encouraging young women to start saving for the future as I am. Lucky for all of us, she understands this stuff.

As for all of you out there who have student loan debt and think, I can’t save for the future when I’m still paying for the past — we haven’t forgotten about you. Contributing to a retirement account should be a priority, even if it’s just a little bit each month. After all, $3,000 a year is just a little more than $8 a day. Hopefully, the advice we offer ahead will make the benefits abundantly clear.

So let’s get started. Feel free to ask questions in the comments; we’ll do our best to answer them. And if you get too bored reading our advice, not to worry, there’s a slideshow of incredible vacation destinations at the end. Just think of it as a preview of your retirement life after all those years of hard work. First piña colada is on my future self.