## How to achieve savings of 1 Million Pesos (P1 million)?

*in*Investing 101

Here at PinoyMoneyTalk, we believe that the path to financial freedom is simple and straightforward. For us, it requires three (3) doable steps:

**Earn**as much money as you can;**Save**to generate extra cash; and**Invest**the extra cash to fast-track your journey to becoming rich.

But to make the goal of “financial freedom” more specific, let’s try to answer this question:

*How much money do you actually need to save in order to get P1 million by the age of 60?*

Well, we now have the answer for you. We’ve made the computations and summarized the results below. In the following examples, we computed the amount of money you must save every month to enable you to get P1 million by the age of 60.

This is, of course, dependent too on the return of the investment where you’ll put your savings into. This is why we’ll show three (3) scenarios, where your savings are placed in an investment that earns:

- five percent (5%) return;
- seven percent (7%) return;
- ten percent (10%) return.

We also assume that you’re starting with nothing, that is, no existing savings or investments yet.

**Start saving early and start investing**

You’ll see in the examples that the amount of money you must save, in order to become a millionaire, is dependent on both the person’s age he or she will begin saving and on the rate of return of the investment where the savings will be placed.

We have two (2) key take-aways in our analysis:

**1. The younger a person starts to save, the smaller the required monthly savings will be.** As you will see below, those in their 20s or 30s will need to save a smaller amount of money monthly compared to those already in their 40s or 50s.

**2. Your savings must be placed in high-earning investments in order to capture the power of compounding.** The higher the rate of return of the investment, the faster you will grow your money, which means the lower the required monthly saving will be.

Let’s look at three examples showing how much you’ll need to save per month, depending on the age you’ll start saving, and the rate of return of the investment where you’ll invest your money.

**How to get P1 million by the age of 60 (Example 1: Annual Return of 5%)**

Your Age | Required Monthly Savings to get P1 million by age of 60 |
---|---|

20 | 655.30 |

25 | 880.21 |

30 | 1,201.55 |

35 | 1,679.23 |

40 | 2,432.89 |

45 | 3,741.27 |

50 | 6,439.88 |

Source: | www.pinoymoneytalk.com |

Assumption: | 5% Annual Return on Investment |

In this scenario, we assume that your money will be invested in an investment asset that will earn 5% per year. This could be stocks, equity or balanced or bond funds, real estate, or any other investment with a net yield of 5% per annum.

The table above confirms that the earlier you save, the smaller the required monthly savings is for you to achieve your P1 million goal by the age of 60.

For example, if you **start saving at the age of 20**, you’ll only need to set aside P655.30 per month. On a daily basis, that’s equivalent to saving P22.00 per day. Now, that’s doable, right?

Save P655.30 every month and invest the accumulated savings in an investment that can earn 5% return per year. If you do this from the age of 20 until the age of 60, you’ll end up with P1 million by the time you reach 60!

Now, the older you start saving, the higher the required monthly savings will be. If you’re** 30 years old**, for example, you’ll have to save P1,201.55 per month. That’s around P546.00 more per month, compared to the amount you’ll need to save if you began saving at age 20.

If you’re **40 years old**, the required monthly savings goes up to P2,432.89.

Now, by the time you’re **50 years old**, you’ll have to save P6,439.88 per month in order for you to get P1 million in 10 years’ time, that is, by the time you reach 60 years old. As you can see, the required monthly savings increases if you start saving late.

Again, the example above assumes a 5% annual return on your investment. If you can put your savings in an asset with a higher rate of return, the required monthly savings will go down. This is shown in the second example.

**How to get P1 million by the age of 60 (Example 2: Annual Return of 7%)**

Your Age | Required Monthly Savings to get P1 million by age 60 |
---|---|

20 | 380.98 |

25 | 555.23 |

30 | 819.69 |

35 | 1,234.46 |

40 | 1,919.66 |

45 | 3,154.95 |

50 | 5,777.51 |

Source: | www.pinoymoneytalk.com |

Assumption: | 7% Annual Return on Investment |

From the table above, the monthly savings required has gone down compared to the first example. This is because your money is placed in an investment with a higher return which compounds and fast-tracks the income you’re earning.

In this example, a 20-year old only needs to save **as little as P380.98 per month**! That’s equivalent to saving just around P12.00 per day! Easy, right?

Again, this amount has to be saved month after month from age 20 until age 60, and the total savings must be placed in an investment that earns 7% net return per year.

If you’re 30 years old, meanwhile, the **required monthly savings is P819.69**.

This goes up to P1,919.66 if you’re **starting to save only by the age of 40** and goes up again to P5,777.51 per month if you’re **saving only beginning the age of 50**.

**How to get P1 million by the age of 60 (Example 3: Annual Return of 10%)**

Now, here’s our final example. If you can invest your total savings in an investment that can consistently earn you 10% year after year, the required monthly savings definitely will go down.

Your Age | Required Monthly Savings to get P1 million by age 60 |
---|---|

20 | 158.13 |

25 | 263.39 |

30 | 442.38 |

35 | 753.67 |

40 | 1,316.88 |

45 | 2,412.72 |

50 | 4,881.74 |

Source: | www.pinoymoneytalk.com |

Assumption: | 10% Annual Return on Investment |

Twenty-year olds only have to save a small P158.13 per month. If you’re 30 years old, you’ll have to set aside P442.38 per month as savings.

If you’re 40 years old and will only start saving now, you need to save P1,316.88 monthly. Finally, 50-year olds will have to save P4,881.74 per month to achieve their P1 million goal.

**What you need to do**

In conclusion, we can see from the examples above that the P1 million goal by the age of 60 is very, very doable!

What you merely need to do is to **earn** as much money as you can, to consciously and consistently **save** per month, and to **invest** your savings in investments that can reliably generate the required rate of return.

So start saving now so you can be a happy millionaire soon!

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Let us earn, save and invest – ESI towards our 1 million pesos!

March 5,2018

Dear ,

Ang tagal naman. It almost 35 years of My stock in Philippines Stock Exchange, way back 1983. Its sad kasi konti palang nakukuha ko.

Pero napakalaking stock. Panalo sa world market. Sino kaya ang makakatulong sa akin para mailabas. Thank you.

Regards,

Dr. Pablo Jr. Angelo M D PhD

Anu po co pany niyo sa psei? Bkitfi niyo pla na pick si pldt that time 1983 3 pesos oa lng si pldt

Your story sounds like the one I read from the Reader’s Digest book “Scoundrels and Scalawags”.

Assuming you have were able to get 1 million pesos by the age of 60 and that 1 million is gaining an interest of 5% per year, then,

1,000,000 x .05 = 50,000 pesos

50,000 pesos / 12 months = 4,166 pesos per month

Is this even enough to live a comfortable life as senior citizen? Sa bagay, may SSS pa naman? Just my opinion.