How Automated Transfers Can Boost Your Investments From $0 to $1 Million

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Let’s face it, sometimes it can be hard to save. Between feeling like you “deserve” to spend money you work hard for and simply forgetting to make transfers to your investment account, it’s easy for a financial plan to get derailed.

But using the automated transfers that nearly any bank will allow you to set up, you can solve the problem with one click. By “paying yourself first” and having money automatically transferred out of your paycheck before you can even use it, you’ll be making contributions through thick and thin, whether you remember to or not.

And if you start early enough, even small automated transfers can add up fast. Here’s everything you need to know about building up a $1 million in investments from nothing with automated transfers.

How To Set Up Automated Transfers

This is the easiest part of the process. Most financial institutions will make it easy for you to set up automated transfers online.

All you’ll have to do is provide your account and routing information from the bank you want to transfer from and you’ll be set. Simply choose the amount and frequency of your transfers, and the bank will do the rest. 

How Much You Should Automatically Save

The amount that you should automatically save varies from person to person. However, you should aim for at least 10% to 20% of your income.

If that’s too big of a chunk to swallow right away, don’t be afraid to start small. Once you get in the practice of saving every month, it becomes easier to increase your contribution amount in small doses. 

For example, let’s say you feel you can only begin saving 4% of your income every month. If you earn $4,000, that’s $160 per month. But if you bump that up to 5% the following month, that’s just another $40 per month, or a little over $1 per day.

Over time, whether you change your contribution amount monthly, semi-annually or annually, you’ll eventually reach your 10% to 20% savings goal. 

How Much of a Difference Starting Early Makes

There’s no better way to understand the power of compound interest than seeing how it works using real-world figures.

Imagine, for example, if you set up automated transfers and save $300 per month starting at age 30. If you earn an annual return of 8%, you’ll have about $688,000 by the time you reach age 65, according to Ramsey Solutions.

But if you instead wait until age 40 to contribute that $300 per month, you’ll only end up with about $285,000.

That means starting just 10 years earlier can translate to a $400,000 boost to your nest egg. This can be a life-changing amount of money and shows the critical importance of starting to save as early as possible. 

How Automated Transfers Can Boost Your Investments From $0 to $1 Million

If you’re looking to save $1 million by the time you retire, you might think you’d need to sock away huge sums of money throughout your entire working career.

But as the above example shows, compound interest can do miraculous things. In fact, if you start early enough, you might be surprised how little money it takes to climb that $1 million mountain.

If you start at age 20 and earn an 8% annual return, for example, you’d only need to invest a paltry $190 per month to reach that goal by the time you reach 65. But even at age 40, 20 full years later, just over $1,000 per month would do the trick. While not as easy as setting aside $190 per month, by the time you reach age 40 you’re likely earning a lot more than you were at age 20, and it might be just as easy for you to hit your goals even with a late start.

Of course, there are variables to these projections, and no investor earns a solid 8% year in and year out. But the most important factor in reaching a seven-figure nest egg is consistency of contributions.

Even if your investment portfolio has down years, if your automated transfers remain intact, you’ll actually benefit, picking up more shares when prices are down. But if you fail to keep up with those contributions, it may be all but impossible to reach your $1 million retirement dream.

This is why it pays to automate your investment contributions as early as possible and maintain them until you retire.

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