Check your bank account and you are sure to find lots of small transactions that average at least $20 a day. A coffee, lunch, snacks, a beer or wine after work; each transaction is low in value but combined they can add up to a significant sum. Money can only be spent once and should be spent on what gives you the most satisfaction. It helps to have a clear understanding of how else money could be spent now and in the future so the best choice can be made. Let’s look at what else $20 a day could be used for over a period of five years.

Buy your first home

Putting $140 a week into a savings account at 2.5% interest (after tax) will give you just under $39,000 over five years. This is a big enough sum to make the difference between being able to buy or not when added to funds available from KiwiSaver. Saving this amount also lets your lender know that you have good money habits.

Pay off your mortgage quicker

Putting money on your mortgage ‘earns’ you the equivalent of whatever your mortgage interest rate is, tax paid. At an interest rate of 5.9%, over 5 years you will save around $42,000 on your mortgage. Talk to your bank about how to increase your repayments without incurring a penalty.

Add to your retirement savings

A long term retirement portfolio invested mostly in growth assets (property and shares) could return around 8% per annum. Over a period of 5 years, you could add just under $45,000 to your retirement fund. By saving on a monthly basis, you have the added advantage and increased return that comes from ‘dollar cost averaging’ – that is, buying investments at varying prices as they go through their cycles.