If you’re trying to build wealth, your first six figures of savings are a huge milestone, 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. “I don’t care what you have to do — 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.”
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Munger was focused on the six-figure milestone because he believed that’s where the real power of compounding is unlocked. Once you cross this critical threshold, your money earns more money at a meaningful scale.
Yet, for countless families, the numbers show that even a much lower milestone — like $20,000 — could be the game-changer. Here’s what makes it so powerful.
North America’s savings crisis
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.
A recent RBC poll revealed almost half of Canadians surveyed said they are unable to maintain their standard of living amid rising costs (1), and Statistics Canada reported that 45% don’t even have emergency savings (2). Additionally, almost 80% of Canadians have had to use their savings more often to stay afloat (3). In other words, many families are operating without a safety net.
That being said, the savings shortage is something some younger Canadians have managed to avoid. According to a 2023 StatCan Wealth survey, the median net worth of adults under the age of 35 was $159K, well above Munger’s $100,000 benchmark (4).
Fortunately, even if your household income falls short of $159K, your personal finances could start changing at a much lower threshold. If you’re young or lack savings, getting to $20,000 could be a real game-changer because it helps you shift your thinking.
Read more: Here are 5 expenses that Canadians (almost) always overpay for — and very quickly regret. How many are hurting you?
Escape from the scarcity mindset
A lack of savings severely limits your financial flexibility. In this situation, your top priority is survival, which means you don’t have the flexibility to leave your job in pursuit of a better one, take time off to get educated or take on investments with significant risk.
In other words, you have little to no wiggle room, which has real effects on the way you think and process the world around you. In fact, a 2023 Scotiabank survey revealed how Canadians are worrying about their finances on average for 15 hours a week, up from 10 hours in the previous year (5). And FP Canada’s 2025 Financial Stress Index indicates nearly half of Canadians lose sleep over money concerns (6).
What $20k will cover
The average Canadian household spent roughly $76,750 on goods and services in 2023, according to StatCan (7). At this level of spending, a $20,000 emergency fund should cover just over three months of living expenses for the typical family.
Once you hit this $20K benchmark, you may consider taking some time off work to invest in education or pursue a better paying job. You’ll also have the flexibility to focus on growth and investments instead of merely surviving. Plus, a $20,000 savings fund also unlocks some compound growth opportunities.
Meaningful compounding
Although it would be great to have $100,000 invested in growing assets, even $20,000 should unlock noticeable growth.
Over a 50-year span, the Canadian equities market has averaged a 10.3% return rate (8). However, more recent long-term forecasts estimate modest annual returns — between 6% and 8% (9). This means if you start with $20,000 and commit to adding $1,000 each month to a low-fee index fund, you could build your way to $100,000 in less than five years — provided market conditions are favourable. Remember: since markets fluctuate, you may get temporarily set back in some years.
In other words, Munger’s magic number is potentially within reach once you hit the $20,000 milestone. For anyone starting from scratch, reaching this milestone can offer breathing room that goes well beyond simple math.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
RBC (1); Statistics Canada(2),(4),(7); Retail Insider (3); Scotiabank (5); FP Canada (6); Million Dollar Journey (8); TD (9)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.