Frugal living conversations often discuss pinching pennies or “stretching a dollar.” A penny saved is a penny earned, or so the saying goes, but is that actually the case?

What if that penny saved could end up being much more over time? Living frugally can save you way more than you might think.

Money is Not Linear

Frugality is typically thought of in straightforward or linear terms – x plus y equals z. If you skip a daily $5 takeout coffee, you’ll save $35 a week, $150 a month, or $1,800 a year.

Using that same thought process, your income will last twice as long if you cut your monthly spending in half. That makes sense, right?

Well, yes and no. This assessment isn’t wrong, but it’s incomplete. Pinching pennies adds up in the short term, but the long-term payoff is more significant than you think. This is because of the time value of money, aka: the interest. When you invest the money you save, you’re stretching that dollar into something greater as it accumulates interest over time.

For instance, instead of simply saving $1,800 a year making coffee at home, you’re really saving $1,800 a year plus any interest you’d earn in investing those dollars in a Movement Bank money market or retirement account. That $5 cup of coffee could eventually be worth an untold amount. Would you give it up for $10, $20, or $50 in the future?

Time Value of Money

Maybe saving $50 per cuppa seems like a lot to you right now, and maybe not. But it’s worth considering how valuable frugality now will be to you down the road. Lowering your expenses now so you can save more and take advantage of interest gains could be the leg up your future self needs to pay cash for a car, make a down payment on a home, go on that dream vacation, or send a kid to college.

Living frugally adds up even in retirement. Say you have $500,000 in an investment account when you retire and spend $75,000 a year. At a 5% return, the money will last seven years. If you cut your savings to $50,000, you’ll get 13 years instead. But if you slash your spending in half – to $25,000 a year – the number skyrockets to 62 years. Reducing your expenses in half increases the length you can live off that initial amount by nearly five times.

It’s worth noting, that a 5% return on investment is fairly conservative—the average stock market return for the S&P 500 (an index fund composed of the 500 largest companies in the U.S.) across the past decade was around 13.6%. Even accounting for 1-3% inflation, your money still gets a sizable value increase.

If you want to keep your expenses at $75,000 annually in retirement, you’ll need to save more—a lot more—than $500,000. You can live on less and save more now to build more for retirement (maybe even early retirement) or live on less when you get there to stretch your dollars.

Scrimp to Save?

This same concept applies to any money goal that could benefit from the runway of time. The money you save now for the future is worth more than the cost of what you’re sacrificing today.

This doesn’t mean getting as close to zero spending as possible is best. It means you have the freedom to stretch your dollars (or not) as you choose. Consider the future costs tied to everyday spending habits, and consider how a few frugal living habits could tip the scales in your favor. In other words, a penny saved could be a nickel, a dime, a quarter, or maybe even a dollar or more down the road.

Movement Bank offers many options to safely put your money away to begin saving for the future. Get started with one of our savings programs at