Investing Investing Basics

9 Ways to Grow $5,000 Into a $1 Million Nest Egg

Invest smarter, not harder, and see your $5,000 snowball into a $1 million nest egg.

By Michelle Smith

Edited by Eric McWhinnie

Updated Dec. 17, 2024

Besides lucky lottery winners and clever stock strategists, becoming a millionaire overnight is nearly impossible. But reaching millionaire status over decades and retiring with a tidy nest egg?

Thanks to compounding interest, it’s not an idle fantasy. The earlier you start investing, the easier it is to turn your upfront investment into $1 million.

Keep reading to see how much you should invest (and for how long) planning for retirement.

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Investing $5,000 but nothing else at 10% for 25 years

To understand how much work it takes to turn $5,000 into $1 million, we’ll start by looking at how much an initial investment at the average rate of return can net you.

Let’s say you make an upfront investment of $5,000 with no additional monthly contributions. There’s no way to know exactly how much you’ll earn on an investment, but the S&P; 500 has an average annual return of 10%, so let’s assume that’s what you’ll make.

If your interest compounds annually, you’ll end up with around $54,173.53 after 25 years. That’s far, far lower than your $1 million goal, and it doesn’t account for how 25 years of inflation will drastically lower your buying power.

In other words, you’ll need to do more than make a one-time $5,000 investment to boost your bank account to $1 million.

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Investing $5,000 but nothing else at 20% for 25 years

What if you invest the same amount of money for the same amount of time but at double the average rate of return?

You’ll end up with $476,981.08, which puts you much closer to millionaire status than investing $5,000 at 10%, but it still leaves you at just 50% of your goal.

Plus, stocks with an annual return of 20% are few and far between. You might be lucky enough to invest in a high-performing company that maintains a rate of return double the average over 25 years, but you shouldn’t count on it.

Besides, even a high-yield investment leaves you with earnings below $500,000 once your investment term is up. Without additional monthly investments, your chances of earning $1 million on your initial $5,000 are slim to none.

Investing $5,000 plus $800 monthly at 10% for 25 years

Everything changes once you start making additional monthly deposits on top of your principal investment of $5,000.

If we add $800 a month to your upfront investment, assume an average return of 10% a year, and compound the interest annually, you’ll end up with $998,305.30.

That’s still a couple thousand away from an even $1 million, but close enough to still call yourself a millionaire, and substantially better than what you’d earn without those additional monthly deposits.

Get a free stock valued between $5 to $200

Secret: You don't need thousands of dollars to buy thousand-dollar stocks or create a diverse portfolio.

Robinhood offers a method of investing called “fractional shares.” On its own, one share of a single stock could cost a lot of money, making it difficult to diversify. Robinhood allows you to buy pieces of stock instead, so you have the option to build a diverse portfolio quickly.

Let’s say you want to invest $250, as an example.

With that amount, you could build a relatively diverse portfolio with an investment of $50 in a big tech stock, $50 in a retail stock, $50 in an energy stock, $50 in a manufacturing stock, and $50 in a bank.¹ This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice. To get stock reward, new customers need to sign up, get approved, and link their bank account. Stock rewards shares cannot be sold until 3 trading days after the reward is granted and the cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at <a href="https://robinhood.com/us/en/support/articles/open-account-pick-your-stock/">rbnhd.co/freestock</a>. Fractional shares are illiquid outside of Robinhood and are not transferable. Not all securities available through Robinhood are eligible for fractional share orders. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see the Fractional Shares section of our Customer Agreement. Robinhood Gold is offered through Robinhood Financial LLC and is a membership offering premium services available for a fee.

Even better news? Add a Robinhood Gold membership, and you’ll get access to 4.25% (as of 11/15/24) APY² Annual Percentage Yield. Rate valid as of April 12, 2024. To earn interest, a cash balance is needed. If you have a margin balance, there is no cash balance to earn interest. Interest rates for cash sweep and margin investing can change at any time. Fees may reduce interest earnings. on your uninvested cash³ Interest is earned on uninvested cash swept from your brokerage account to partner banks. Partner banks pay interest on your swept cash, minus any fees paid to Robinhood. As of Nov 15, 2023, the Annual Percentage Yield (APY) that you will receive is 1.5%, or 5% for Gold customers. The APY might change at any time at the partner banks' or Robinhood's discretion. Additionally, any fees Robinhood receives may vary and are subject to change. Neither Robinhood Financial LLC nor any of its affiliates are banks. All investments involve risk and loss of principal is possible. Robinhood Financial LLC (member SIPC), is a registered broker dealer. and the ability to buy and sell stocks 24 hours a day, 5 days a week.

Open and fund a Robinhood account and earn up to $200 in stock

Investing $5,000 plus $1,500 monthly at 10% for 20 years

The more money you can invest every month, the higher your overall return will be — and the less time it will take you to pass the $1 million mark.

For instance, if you nearly double your monthly contribution from $800 to $1,500 and lower your investment time from 25 to 20 years, you’ll have $1,064,587.49 at the end of your two decades.

Investing $5,000 plus $2,600 monthly at 10% for 15 years

Is two decades too long to wait for $1 million? Up your additional monthly contribution to $2,600. With the same average return, you’ll end up with $1,012,187.67 after just 15 years.

Investing $5,000 plus $1,100 monthly at 8% for 25 years

10% is the average annual return for the S&P; 500 over the long run, but if the last few years have shown us anything, the economy is notoriously hard to predict or control.

To err on the side of safety, let’s see what happens when we lower your estimated interest rate to 8%.

Investing $5,000 upfront and another $1,100 once a month, every month for the next 25 years at 8%, you’ll end up with $999,240.78, just close enough to call yourself a millionaire.

Grow Your $$: 11 brilliant ways to build wealth after 40

Investing $5,000 plus $1,800 monthly at 8% for 20 years

Upping your monthly investments from $1,100 to $1,800 gets you closer to $1 million in five fewer years. Even at the below-average rate of 8%, you’ll end up with $1,011,763.21 after 20 years.

Investing $5,000 plus $3,025 monthly at 8% for 15 years

By this point, you know the best way to retire with $1 million is to make ongoing monthly investments — the higher, the better.

If you can put away just over $3,000 a month on top of your $5,000 lump sum investment, you’ll have $1,001,482.58 in just 15 years.

Investing $5,000 plus $5,175 monthly at 10% for 10 years

Want to make yourself into a millionaire as rapidly as possible? A decade isn’t exactly overnight, but investing more than your principal each month at an average annual return of 10% will get you to $1,002,682.78 in just 10 years.

Of course, few Americans have an extra $5,000 a month just waiting for an investment opportunity to show up.

But if you’re serious about earning your first $1 million, investing income from a second job or side gig plus the money you save through a strict budgeting regimen is the best way to get there.

Earn up to a $300 bonus and grow your money with up to 4.00% APY

This powerful combination checking + savings account from SoFi® allows you to earn up to a $300 bonus with direct deposit and grow your money with up to 4.00% APY.⁴ New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) OR $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/2026. Full terms at <a href="http://sofi.com/banking">sofi.com/banking</a>. SoFi Checking and Savings is offered through SoFi Bank, N.A., Member FDIC. SoFi members with Direct Deposit can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the 4.00% APY for savings (including Vaults). Members without Direct Deposit will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of Dec. 3, 2024. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a>

This is one of the top accounts we’ve seen, and offers like this can be rare. You work hard, and now it’s time to make your money work for you — with SoFi, you can grow your money with hardly any effort!

SoFi has no account or overdraft fees⁵ Overdraft Coverage is limited to $50 on debit card purchases only and is an account benefit available to customers with direct deposits of $1,000 or more during the current 30-day Evaluation Period as determined by SoFi Bank, N.A. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Members with a prior history of non-repayment of negative balances are ineligible for Overdraft Coverage. and additional FDIC insurance up to $2 million on deposits is available through a seamless network of participating banks.⁶ We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at <a href="http://sofi.com/legal/banking-fees/">sofi.com/legal/banking-fees/</a> ⁷ SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/terms">SoFi.com/banking/fdic/terms</a> See list of participating banks at <a href="http://sofi.com/banking/fdic/receivingbanks">SoFi.com/banking/fdic/receivingbanks</a> Plus, you can receive your paycheck up to 2 days early.⁸ Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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SoFi is a Member, FDIC. ⁷ SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/terms">SoFi.com/banking/fdic/terms</a> See list of participating banks at <a href="http://sofi.com/banking/fdic/receivingbanks">SoFi.com/banking/fdic/receivingbanks</a>

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Bottom line

Turning $5,000 into $1 million takes time, discipline, and additional funding. Depending on your average rate of return and how many years you can afford to wait, earning $1 million through investing is far from a one-and-done job.

However, with solid financial planning, budgeting, and plenty of guidance from a trusted financial planner or retirement advisor, you can build wealth while you sleep to $1 million or more.

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