When it comes to building wealth, many people assume that investment returns are the magic ingredient that transforms a small nest egg into a fortune. While it’s true that the power of compounding can work wonders, the reality is that without consistent and dedicated saving habits, even the best investment returns won’t amount to much. Whether you’re a seasoned investor or just starting out, it’s crucial to understand that saving—not just investing—is the true driver of long-term wealth.

The Foundation: Small Savings Lead to Big Numbers

One of the most common misconceptions is that you need to make a lot of money or have significant wealth to save or invest in the first place. This belief often leads people to put off saving, assuming they’ll start once they reach a higher salary or pay off certain debts. But here’s the reality: even small, regular contributions can add up to big numbers over time.

Let’s say you’re able to save just $100 a month. That might not seem like much, but over the course of a year, you’ve saved $1,200. Over ten years, without factoring in investment returns, you’ve accumulated $12,000. Now, if you invest that money and earn a modest 5% annual return, your savings would grow to nearly $15,500 over those ten years. That’s an extra $3,500 you’ve earned just by consistently saving and letting your investments work for you.

The key takeaway here is that it’s not how much you save initially, but how consistently you save that makes the difference. Whether it’s $100 or $1,000, regular saving habits lay the groundwork for long-term financial success.

The Myth of “Big Investment Returns”

Many people believe that investing is what makes you wealthy. It’s easy to get caught up in the excitement of the stock market or the idea of picking the next big winner. However, even with high returns, the amount you save and invest still plays a critical role.

Consider this: if you invest $1,000 and earn a 10% return in a year, you’ve made $100. But if you only saved $100, a 10% return nets you just $10. The percentage return stays the same, but the dollar amounts differ significantly based on how much you initially invested. Over time, it’s the combination of consistent savings and investment returns that builds wealth. One cannot thrive without the other.

Focus on What You Can Control: Saving

Investment returns are largely out of your control. Markets go up and down, and while you can make informed decisions, you can’t predict exactly how your investments will perform. What you can control is how much you save. By focusing on regular savings, you’re taking a proactive approach to your financial future, ensuring that you’ll have a strong foundation to build on regardless of market fluctuations.

Here are some tips for building strong saving habits:

  1. Automate Your Savings: Set up automatic transfers to your savings or investment account, so you don’t even have to think about it. This ensures you’re consistently putting money away without the temptation to spend it.
  2. Start Small: If $100 a month seems like too much, start with $50 or even $20. The important thing is to get into the habit of saving regularly. Over time, you can increase the amount as your income grows.
  3. Cut Unnecessary Expenses: Track your spending to identify areas where you can cut back. Redirect that money into savings. It’s amazing how small adjustments—like brewing coffee at home instead of buying it every day—can free up extra funds for savings.
  4. Celebrate Milestones: Saving can sometimes feel like a slow process, so it’s important to celebrate your progress. Whether it’s reaching your first $1,000 or seeing your investment returns compound, take a moment to recognize your achievements and stay motivated.

The Long-Term View: Building Wealth with Time

When it comes to wealth-building, time is your greatest ally. The earlier you start saving, the more time your money has to grow, both from your regular contributions and from compounding investment returns. Over decades, even small amounts can snowball into significant wealth if you remain consistent.

For example, if you start saving $200 a month at age 25 and earn a 6% return on your investments, by the time you’re 65, you’ll have accumulated over $400,000. If you wait until age 35 to start saving, you’ll have just over $200,000 by 65—half as much. This is the power of both compounding and consistency.

The Secret to Wealth is in the Habit

While investment returns are important, they are only one piece of the puzzle. Without a steady habit of saving, even the best investment strategy won’t get you far. By focusing on what you can control—your savings rate—and staying consistent, you’ll give your investments the fuel they need to grow.

Remember, it’s not about how much you make or having large sums of money to start. It’s about building the habit of saving and letting time and consistency work their magic. Over time, your small, regular savings will add up, and your investments will begin to compound, helping you achieve financial security and, ultimately, wealth.

In the end, saving is the foundation of all wealth-building efforts, and the earlier you start, the better off you’ll be.