Charlie Munger said saving $100K creates the fast track to wealth, but here’s why just 20K can set you up for success

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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 (1).

“I don’t care what you have to do,” he continued. “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.”

Munger’s six-figure fixation might seem a bit arbitrary at first, but his reason behind it was actually simple: Six figures are where the real power of compounding is unlocked. Once you cross this critical threshold, your money earns more money at a meaningful scale.

But not everybody agrees. Some financial advice gurus are saying there’s freedom to be had with numbers as low as $20,000.

Financial YouTuber Nischa Shah explains that once you’ve saved just 20 grand, you can begin taking advantage of the power of compound interest in your investments. More importantly, you can stop being driven by fear — and not have to take the first job you’re offered or stay in a role you hate because you lack other options.

“Compound interest is one of the most powerful forces in finance,” she said (2). “And once you hit 20K, you’ll see exactly what it means. Your money doesn’t just sit there anymore. It starts earning returns. And then those returns start earning their own returns.”

In her words, “It’s like planting a tree that grows even more trees for you.”

Either way, whether the magic number is five or six figures, it’s clear the experts agree on one thing: When it comes to investing in your financial future, compound interest is the best friend to your savings.

Here’s why maximizing savings with compound interest unlocks your wealth potential — and what you can do to hit your goal and discover financial freedom.

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 3.5% in November 2025, which is the latest month that data is available, as of February 2026 (3).

What is more alarming is that 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 (4).

In other words, many families don’t have a safety net.

The dearth of savings is particularly acute for younger Americans. According to 2026 data from Empower, the median net worth of Americans in their 20s is just $6,600, and those numbers only climb to $23,093 for those in their 30s and $68,698 for those in their 40s (5).

That’s much less than Munger’s benchmark.

That’s why it’s important to remember that your personal finances could start changing at a much lower threshold. If you’re young or lack savings, just getting to $20,000 could really help shift your thinking.

A lack of cash available immediately can limit your flexibility. In this situation, your top priority has to be survival, which means you don’t have the opportunity to leave your job in pursuit of a better one, take time off to get educated or take on investments with significant risk.

Simply put, you have little to no wriggle room, and that has real consequences on the way you think and process the world around you.

According to a survey of Vanguard customers, people with no emergency fund spend nearly twice as much time thinking about money issues every week than those with at least $2,000 in in the bank (6).

That’s why a high-yield account like the Wealthfront Cash Account can be a great place to grow your emergency fund, offering both competitive interest rates and easy access to your cash when you need it.

A Wealthfront Cash Account currently offers a base variable APY of 3.30%, and new clients can get a 0.75% boost during their first three months on up to $150,000 for a total APY of 4.05%. That’s 10 times the national deposit rate, according to the FDIC’s January report.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, Wealthfront Cash Account balances of up to $8 million are insured by the FDIC through program banks.

Read More: I’m almost 50 years old and don’t have retirement savings. Is it too late to catch up?

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Boosting your savings can certainly fatten your wallet, but they have profound implications for your mental health, too.

The same Vanguard study also found that going from no savings to $2,000 in savings improved financial well-being by 21% (6). Indeed, those who progressed further and saved up three to six months of living expenses in an emergency fund saw another 13% bump in well-being.

Put another way, it’s good for your health to have an emergency fund.

But scraping together an emergency fund might not seem easy at first. American households spent roughly $78,535 per year in 2024, according to the Bureau of Labor Statistics (7). That means a $20,000 emergency fund should cover just over three months of living expenses for the typical family.

Once you hit this benchmark, though, you won’t need to focus as much on surviving and can start focusing on growth and investments instead. You can also start to think about taking some time off work to invest in education or pursue a better-paying job.

The question is, how do you get to that benchmark?

It could be as easy as setting up a budget. A quick daily check-in of your accounts can show you exactly where your money is going — and find new ways you can save.

However, if managing a budget feels overwhelming to you, apps like Rocket Money can simplify the process.

Rocket Money can easily flag recurring subscriptions, upcoming bills and unusual charges by pulling in transactions from all your linked accounts.

This can help you cut unnecessary costs, and then you can manually redirect savings straight into your retirement fund. No spreadsheets, no guesswork, no stress. Small habits like this can make a big difference over time.

Rocket Money’s intuitive app offers a variety of free and premium tools. Free features include subscription tracking, bill reminders and budgeting basics, while premium features — like automated savings, net worth tracking, customizable dashboards and more — make it easier to stay on top of your retirement contributions and overall financial goals.

Once you’ve set up a budget, it’s also worth assessing how you’re spending money. As Munger suggested, you might consider cutting back where you can.

For instance, you might find in your budget that you have monthly expenditures that should be reassessed and trimmed down.

That doesn’t have to mean sinking to an untenable living standard, though.

Most people look to cutting down on subscriptions like Netflix or DoorDash, or going out less. While these are smart options, you could also consider looking to other ways to save on essential expenses, such as reducing your cell phone bill and car insurance.

Sometimes, you have to go shopping around for the best deals.

When it comes to saving on car insurance, free services like OfficialCarInsurance can help find the lowest rates for you.

OfficialCarInsurance.com lets you instantly sort through policies from car insurance providers in your area, including trusted names like Progressive, GEICO and Allstate. With rates as low as $29 per month, you can find coverage that suits your needs and potentially save you hundreds of dollars per year.

To get started, fill in some basic information, and OfficialCarInsurance.com will provide a list of the top insurers in your area within minutes.

Ultimately, even after setting up your savings and reducing expenses, it is always a good idea to keep things in perspective.

After all, for anyone starting from scratch, getting to the $100,000 milestone can offer breathing room — but it can also be such an overwhelming number that you never even start. Although it would be great to have $100,000 invested in growing assets, even $20,000 can unlock noticeable growth.

Here’s why.

The S&P 500 has delivered a compounded annual growth rate of 10% since 1957 (8). Socking away the first $20,000 you don’t need for other savings goals into a low-cost index fund that tracks this index, then adding $1,000 per month, could get you to the $100,000 threshold in just under five years if the market remains at historic, favorable levels.

However, if you were to have sold off your investments in a year like 2022, when the S&P was down nearly 20% year-over-year, you could end up losing a lot of money — investing always carries risk (9).

And that’s why it’s crucial you have a long-term outlook — like Munger and Warren Buffett — when it comes to investing so that you can ride out any stock market volatility.

Speaking of market volatility, it’s also important to diversify your investments so that you aren’t over-indexed in any one stock or market. But finding the right stock picks can be tricky, and top-shelf advisor services often have asset under management (AUM) fees, which are charged as a percentage of the portfolio’s total value.

That’s where apps like Acorns can come in.

How it works is simple: When you make a purchase on a linked credit or debit card, Acorns automatically rounds up to the nearest dollar, and the excess is placed into a smart investment portfolio.

Let’s say you purchase a doughnut for $2.30. Before you’re done licking the sugar off your fingers, Acorns will round the amount to $3.00 and invest the 70-cent difference for you. Just $2.50 worth of daily round-ups add up to $900 per year — and that’s before your savings earn money in the market. This could give you the boost you need to reach that $20,000 benchmark.

Plus, if you sign up now and set up a recurring investment of at least $5, you can get a $20 bonus investment.

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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

The Globe and Mail (1); @nischa (2); Bureau of Economic Analysis (3); Empower (4), (5); Vanguard (6); Bureau of Labor Statistics (7); Business Insider (8); CNBC (9)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.