Here's What Happens When You Invest $100 a Month for 40 Years

I mentioned to a friend not so long ago that I'd sold some stocks in my brokerage account to make room for another investment I was interested in. His response? "I've really got to start investing, don't I?"

I didn't want to make matters worse, but in my head, I was thinking, "Um, yes." See, this friend of mine is almost 40 and hasn't started building his retirement nest egg. And if I'm being honest, I'm kind of worried that if he doesn't start soon, he's not going to end up with enough savings for a comfortable retirement.

But I know a big reason he hasn't started investing is that money is perpetually tight in his world. He's the sole breadwinner at home and is juggling the many expenses that come with raising kids. So it's hard to find the money to invest with.

That said, I wish my friend realized that investing even a small amount of money each month has the potential to really do a lot. In fact, you may be surprised at what a $100 monthly investment can do for your future.

The numbers may surprise you -- in a good way

It's natural to assume that if you want to retire with a lot of money, you have to invest a lot of money month after month. I'm here to tell you that you can accumulate a large retirement nest egg even if you never contribute more than $100 a month to an IRA or 401(k) plan. In fact, if you invest $100 a month over 40 years, you could end up with a portfolio worth $531,000.

However, that number hinges on a very big assumption, and it's that your portfolio is generating an average yearly 10% return. But achieving that 10% may be more doable than you'd think.

That's because over the past 50 years, the stock market has averaged that same return based on the performance of the S&P 500 index. So if you load a portfolio with S&P 500 index funds, which are passively managed funds that basically have you invested in the index itself, you might enjoy that same return on your savings. And thanks to the power of compounded returns, with a 40-year investment window, you can turn a total of $48,000 in retirement plan contributions into $531,000.

Of course, your ending balance will look different if you wait to start building a retirement nest egg and therefore don't have 40 years to save that $100 every month. If you save $100 a month for 30 years, your ending balance may only come to about $197,000, assuming that same 10% return. That's a decent amount of savings -- and about $77,000 more than the average baby boomer has today, according to Northwestern Mutual. But it's a far cry from $531,000.

Invest any amount of money you can, as soon as you can

If you're in the same boat as my friend, you may be turned off from investing due to a lack of money. What I wish my friend would realize is that it's worth it to invest $20 a month here, or $40 a month there, or whatever you can afford.

We just saw how much a $100 monthly investment can do over time. But if you can't swing $100 a month, invest something. The more years you give your money to grow, the better your results are apt to be.