How much inflation really 'eats up' and how much you can earn by investing minimally every month

It is possible to earn even on a minimum wage. In order to assess how inflation affects the purchasing power of savings, the simplest approach is to rely on annual inflation indicators. For example, if annual inflation is around 4 percent, it means that with the same 1000 EUR this year, compared to last year, one can purchase approximately 4 percent fewer goods and services.

Kristina Ruseckienė, head of savings and investment services at SEB bank, says this is only an approximate assessment. Each resident experiences inflation differently – it all depends on their consumption habits. If a large part of expenses consists of food, and it is precisely food prices that have risen the fastest over the year, it is likely that such a person will feel the impact of inflation more strongly than someone whose consumption basket has a smaller share for food.

To assess how much the purchasing power of savings has decreased over the year, it is sufficient to rely on annual inflation. According to the State Data Agency, annual inflation in Lithuania in 2025 was about 3.8 percent. This means that savings that were not invested or held in a deposit lost that much purchasing power over the year. Therefore, one of the most important goals of investing is to earn a higher return than inflation and thus preserve the value of savings.

It is usually recommended to allocate about 10–20 percent of monthly income for saving and investing, but there is no universal recipe – it all depends on the personal financial situation. Nevertheless, time is the most important ally when investing. The earlier one starts investing, the more benefit the compound interest effect provides – investment returns are earned not only on the initial amount but also on previously accumulated returns. Therefore, in the long run, the best results are usually achieved not by those who invest the most, but by those who do so consistently and regularly.

“For example, if a person earning the minimum wage (about 847 EUR per month) invested 10 percent of their income each month, i.e., about 85 EUR, and the average annual stock market return were 8 percent, over five years they would accumulate about 6,246 EUR. Of this, about 5,100 EUR would be contributions, and about 1,146 EUR – investment returns,” the interviewee calculated.

Based on the same assumptions, a person earning about 1,439 EUR net per month would accumulate about 10,574 EUR over five years. Of this, about 8,634 EUR would be the invested amount, and about 1,940 EUR – earned investment returns.

Meanwhile, a person receiving about 3,000 EUR net per month would accumulate about 22 thousand EUR over five years. Approximately 18 thousand EUR would be their contributions, and about 4,045 EUR – investment returns.

It is important to remember that these are only theoretical examples. Stock markets can fluctuate significantly in the short term, so a long time horizon is crucial when investing. In the long run, the impact of short-term market fluctuations on investment results usually diminishes.

Results are determined by many factors. When evaluating investment results, two indicators are usually analyzed – nominal and real return. Real return shows how much the investment earned after accounting for inflation. It is calculated using the formula: (1 + nominal return) / (1 + inflation rate) – 1. For example, if an investment earned 10 percent in a year and inflation was 3 percent, the real return would be about 6.8 percent.

“Investments can be realized at any time by selling the financial instruments you hold. The specific conditions depend on the chosen service provider and the investment instrument, but today trading in stocks, bonds, or exchange-traded funds is fast and simple. The investor only needs to select the security they wish to sell and the sale conditions in the app,” the specialist explained.

Some people who invest for a long time and consistently later finance part of their daily expenses from investment returns. When planning how much capital would be needed for this, the so-called 4 percent rule is often used. It states that if you spend about 4 percent of your investment portfolio's value annually for consumption and leave the remaining capital invested, the accumulated funds could theoretically last for about thirty years.

Asked how much money needs to be saved to be able to live off the returns, K. Ruseckienė explained – if we wanted to receive 1,000 EUR per month from the investment portfolio, according to the 4 percent rule, we would need to accumulate an investment portfolio worth about 300 thousand EUR ((1,000 × 12) / 0.04 = 300,000). The author of this rule, William Bengen, reached this conclusion after analyzing long-term historical financial market data. Nevertheless, the rule is not universal – actual results depend on inflation, market conditions, investment returns, and individual spending needs.

Accordingly, if a person's monthly expenses were 1,500 EUR, following the 4 percent rule, they would need to accumulate an investment portfolio worth about 450 thousand EUR.