What can you buy with £4 these days? I threw the towel in getting a pint that cheap long ago. Supermarket meal deals seem to have crept above that price too. And I look away for a few seconds and now takeaway coffees don’t cost two quid anymore! What a world! But as meagre a sum as it seems to be in 2025, a daily saving of that amount could lead to some impressive passive income.
How impressive? Let’s dive into the numbers and see just what a daily £4 could turn into and how big an income stream might result.
Slow not fast
So what are we doing with the money? For me it’s a no-brainer – take advantage of the power of the stock market.
Safer options like savings accounts tend to be a store of money rather than a grower of the stuff. Riskier options like cryptocurrencies are more akin to gambling in my eyes. Whereas investing in listed companies has a very long track record of building wealth, even with just average returns from investing.
One popular rule of thumb states that 10% a year is what to expect with this method. That won’t make anyone rich quickly, but it might perform the feat slowly. And if we can aim for a touch above the average return? More’s the better.
Patience is the name of the game here — not only in letting our savings multiply, but in choosing the right companies that can perform over the long term. FTSE 100 defence firm BAE Systems (LSE: BA.) has this kind of track record, tracing its origins back to 1977 when it was British Aerospace.
The defence sector in general isn’t going away either. The sad reality is that I can count five headline-worthy conflicts happening this year alone. The recent bubbling in global tension has been a boon for the BAE share price too, as it’s up 60% year to date.
Part of this surge is due to BAE’s state-of-the-art military tech being prized by nations globally such as the firm’s fourth-generation fighter planes, the Eurofighter Typhoon. As for risks, the shares might struggle if the firm can’t shake off its habit of finishing projects late and over budget.
What is possible
Now we’re armed with a £4-a-day saving rate and a plan to invest the money into high-quality stocks and shares, let’s crunch some numbers. With example return rates of 9%, 10%, and 11% – and over a typical investing timeline of 30 years – the final amounts would come in at £205,725, £249,515, and £303,393.
Those are some chunky-looking nest eggs and it’s worth remembering that it’s the investing that’s doing the hard yards here. The last calculation is 14% contributions and 86% returns from stocks.
We’ll be dialling back the return rate when we want to withdraw to give us some buffer room. That’s because we don’t want the pot to dry up. With a 4% drawdown, then, we might be looking at yearly passive income of £8,229, £9,981, or £12,135.
Just like no battle plan survives contact with the enemy, no investing plan survives contact with the whole life thing. So this is not so much a strict plan to follow, as an example to show what might be possible.
