I love finding easy ways to save/earn money. The trick is when I come across an extra $5 in savings or a $10 check from a rewards site, I immediately invest the money. Truthfully, these small amounts don’t really mean much to me today, but if I develop the habit of always putting this “extra money” aside and letting it grow, it should become a nice little chunk of change down the road.
Let’s take for example the cash back I receive through Ebates. For those that are unfamiliar with this site, if you’re going to make an online purchase anyway, go through Ebates first and they’ll pay you a percentage of the total. Basically they’re taking a portion of their referral bonus from these stores and giving it back to you. In my mind, if I am going to buy those sunglasses online anyway, it’s nice to get some extra cash back (in addition to credit card rewards, but that’s another topic).
I average about $300/year in cash back from this site. This isn’t income, I didn’t work for it, I don’t need it(now). My philosophy is that it can go and work for me for twenty years, maybe I’ll need it then, maybe my kids will need it then, maybe it wants to keep working for me a little longer, who knows?
Here’s the math: Let’s use a conservative estimate that this money will grow at an rate of 6%. That $300 would be worth over $960 in 20 years. Now if I consistently invested this cash back every time it was received I’d be sitting on an extra $12,660 in twenty years ($300 invested yearly at 6% interest for 20 years). Not too shabby.
While I probably get the most cash back yearly from Ebates and credit card rewards, there are other sites that offer smaller amounts of cash back. Some you have to work a little for, others are more passive. The trick is that all of this “extra money” needs to start working for you now in order to take full advantage of the powerful compound interest effect.