£3 a day now could earn me £5 a day of extra income in future. Here’s how.

By putting aside a few pounds each day, within 15 years our writer could be earning a fiver of extra income daily. Here’s how.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Smiling white woman holding iPhone with Airpods in ear

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

People do not always think about the future, but it lies ahead of us all. Thinking about how to earn money in future as well as now seems like prudent financial planning, in my view. Buying shares with an eye to holding them for the long term is one way I hope to earn extra income.

Doing that could help me set up extra income streams for when I retire, for example.

It does not need to be a costly approach. If I could spare just £3 a day, here is how I would put it to work to try and set up long-term income streams.

Should you invest £1,000 in British Land Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if British Land Plc made the list?

See the 6 stocks

Earnings dividends from proven blue-chip businesses

The income streams I have in mind are the dividends some businesses pay when they generate extra cash they do not need.

So I would be looking to buy shares in large, blue-chip businesses I expect can continue to generate such cash flows and hopefully pay them out as dividends.

Nothing is ever guaranteed in life – and that is certainly true of dividends, even when a company has paid them before. So I would use my £3 a day to build a portfolio of different high-quality shares I think can pay juicy dividends in future.

To get the ball rolling, my first move would be to set up a share-dealing account or Stocks and Shares ISA. In fact, I would do that today and put my first £3 in, starting the habit as I mean to continue.

Finding income shares to buy

But while that sounds simple, what about choosing the shares I hope will pay me my extra income?

That takes time and some effort. I would want to research carefully to find shares I felt offered me a stake in a good enough business at a reasonable enough price.

To illustrate the sort of share I am looking for, we can take British Land (LSE: BLND). I do not own the share — but I think it helps show some of what I am looking for when hunting for income shares.

The commercial landlord is in a market I expect to see very long-term demand. Perhaps office demand will come down, hurting sales. Maybe online shopping will lead to more retailers closing their physical stores. But over time, the prime property British Land owns can be repurposed.

Created with Highcharts 11.4.3British Land Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

That estate is unique. Only British Land owns its prime Paddington Central development. If a business wants to site itself there, its landlord will be British Land. That gives the FTSE 250 property developer pricing power. The shares have a 5.4% dividend yield.

In today’s market though, I think I could do even better! That 5.4% is already above the average FTSE 250 yield, but I believe I could earn a 7% yield sticking to blue-chip shares.

Using a long-term approach to my advantage

Instead of taking extra income now, I would reinvest the dividends to buy more shares. That is known as compounding.

Putting in £3 a day and compounding at 7% annually, after 15 years I would be earning extra income of £5 a day, on average. I could keep compounding – or start spending!

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

US Stock

Up 4% in a week, is this the end of the slump for Tesla stock?

Jon Smith notes a brief respite for Tesla stock after a continued fall but flags up why the amount of…

Read more »

artificial intelligence investing algorithms
Investing Articles

2 high-growth tech stocks to consider buying and holding for the next 5-10 years

Looking for growth stocks to buy today? These two have bags of long-term potential in today’s digital world, says Edward…

Read more »

Investing Articles

Here’s why the B&M share price just jumped 5%

The B&M share price has had a tough 12 months. But the latest upbeat year-end trading update makes me think…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Making these moves in an ISA now could pay off in 5 years

Investing in an ISA now, while shares prices are low, could look like a brilliant move in five years’ time,…

Read more »

Warm summer evening outside waterfront pubs and restaurants at the popular seaside resort town of Weymouth, Dorset.
Investing Articles

As tariffs create uncertainty, this legendary FTSE 100 stock is rising

This under-the-radar FTSE 100 stock just hit a new 52-week high, despite all the uncertainty in the global economy at…

Read more »

Investing For Beginners

Is this the end of the FTSE 100 market rout? 3 things I’m watching like a hawk

Jon Smith looks to assets such as the US dollar and gold for signs of whether or not the FTSE…

Read more »

Investing Articles

The Shell share price is down 16% in April and looks a bargain to me

The Shell share price may have tanked in the recent market sell-off, but Andrew Mackie explains why he remains bullish…

Read more »

Young Asian man shopping in a supermarket
Investing Articles

Down 15%! Should I snap up Tesco shares for a second income?

This investor is open to adding another FTSE 100 dividend stock to his portfolio to build up a second income.…

Read more »