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If you’re trying to build wealth, your first six figures in savings is a huge milestone. That’s according to the late billionaire Charlie Munger.
“It’s a b——, but you gotta do it,” Munger told investors at an annual Berkshire Hathaway meeting two decades ago.
“I don’t care what you have to do — if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.”
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Munger was focused on the six-figure milestone because he believed that’s where the real power of compounding is unlocked. Once you cross this critical threshold, your money earns more money at a meaningful scale.
Yet, for countless families, the numbers show that even a much lower milestone — like $20,000 — could be the game-changer. Here’s what makes it so powerful.
Munger’s $100,000 benchmark has math on its side. But in reality, most families struggle to set aside six figures as they battle stagnant wages and rapidly rising costs of living.
To put this in perspective, the national savings rate, or amount of disposable income left over after accounts are settled, was just 4.6%, according to the Bureau of Economic Analysis. (1) In fact, 21% of Americans have no emergency savings at all, and 37% say they would struggle to cover an unexpected $400 bill, according to a 2024 survey of 1,192 Americans from Empower. (2)
In other words, many families don’t have a safety net.
The dearth of savings is particularly acute for younger Americans. According to a 2024 report by Fidelity Investments, the median net worth of adults under the age of 35 is just $39,000. (3) That’s well under half of Munger’s $100,000 benchmark.
Fortunately, your personal finances could start changing at a much lower threshold. If you’re young or lack savings, getting to $20,000 could really help shift your thinking.
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Another way of securing higher returns is through certificates of deposit (CDs), which lock your money away for a fixed term in exchange for a guaranteed return. Rates vary by term but can exceed 4% for longer durations.
