Quitting smoking may result in significant financial gains.
Over in Germany, nearly a quarter of the adult population still smokes cigarettes. Considering the World No Tobacco Day on May 31st, it might be a chance to kick the habit. Not only is it better for your health, but the financial benefits are also abundant.
Do you need a push to give up smoking? Picture yourself investing the money you'd usually spend on cigarettes into an exchange-traded fund (ETF) instead. Comparison site Verivox estimated that by quitting smoking over three decades, you could amass nearly half a million euros in your savings account.
At the moment, a pack of 20 branded cigarettes costs 8.20 euros in Germany. Somebody who smokes a pack every day would spend approximately 249 euros monthly on them. Over ten years, Verivox believes that the total spending would reach 35,769 euros, and in 30 years, it would skyrocket to 165,000 euros, assuming a 3.9% yearly increase in prices like in the past two decades.
The Miracle of Compound Interest Over the Years
If you cease smoking and pump the money you'd have spent on cigarettes into an ETF linked to the MSCI World index, it's possible to accrue a portfolio worth 462,000 euros in 30 years, provided the ETF retains its average annual return rate of 7.2%. The computation is based on the assumption that the smoker increases their savings at a rate of 3.9% annually, similar to the historical annual growth in cigarette prices. Additionally, the ETF would automatically invest any returns.
The marvel of compound interest amplifies the smoker's portfolio value over time. Assuming an ETF with an average annual return rate of 7.2%, Verivox's model estimates that after ten years of saving, the portfolio's worth would reach around 51,000 euros. 70% of this amount would come from the smoker's contributions, while only 30% would result from gains and compound interest. After 30 years, the portfolio would skyrocket to 462,000 euros, with 33% of this amount stemming from the saver's contributions and the remaining 300,000 euros from growth driven by returns and compound interest.
Keep in mind that selling your shares would disqualify you from claiming the full fund value. Only 73.63% would be your profit, with the remaining 26.37% heading to the tax office. However, the remaining 407,000 euros could be considered a substantial sum.
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- If you manage to quit smoking and invest the saved money into an Equity fund or an ETF like the one linked to the DAX index, you could see significant financial gains over the years due to compound interest.
- Working with a financial advisor can help you make informed decisions about where to invest your savings, whether it's in Health Equity funds or other types of ETFs.
- Smoking poses numerous health hazards, and while quitting can lead to financial benefits, it's important to remember that investments, such as ETFs, come with their own potential risks and should be approached with careful consideration.
- When considering financial investments, it's essential to consider other factors beyond just the potential returns. For example, a healthier lifestyle, such as avoiding smoking, can lead to long-term financial savings and overall improvement in your well-being.
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