Smoking is expensive. If you invest your money in an ETF savings plan instead of puffing, you can save over 400,000 euros in 30 years.
Smoking is not only bad for your health, it also puts a significant strain on your wallet. If you smoke a pack of cigarettes a day, the costs over 30 years add up to around 165,000 euros. If smokers were to invest this money in an ETF savings plan instead, they could save over 400,000 euros in the same period. This was the result of a model calculation by the comparison portal Verivox on World No Tobacco Day on May 31st.
A pack of 20 branded cigarettes currently costs €8.20. If you smoke a pack a day for ten years, you’ll spend a total of €35,769. In 30 years, the costs add up to €165,088. In its projections, Verivox assumed that cigarettes will become 3.9 percent more expensive each year – in line with the average price increase over the last 20 years.
According to the Federal Ministry of Health, almost a quarter (22.7 percent) of all adults in Germany still smoke. “Those who manage to quit smoking and invest the money they spend on cigarettes profitably instead not only reduce the risk of serious illness, but can also build up a substantial fortune in this way,” says Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH.
Ex-smokers who smoked a pack a day save around 249 euros a month by giving up tobacco. Anyone who invests this money in an ETF savings plan can build up a portfolio of 462,000 euros in 30 years.
In Verivox’s model calculation, the money saved is invested in an ETF on the MSCI World global stock index. The calculation was based on an annual return of 7.2 percent, which corresponds to the historical average return of an ETF savings plan with a 15-year term on the MSCI World over the last 40 years. The monthly savings amounts increase by 3.9 percent each year in line with the average price increase for cigarettes.
“Anyone who wants to build wealth effectively can achieve their goal particularly quickly with an accumulating ETF,” says Oliver Maier. “Here, the dividends are not paid out to the investor, but are immediately reinvested. As with the compound interest effect, future increases in value have an even greater impact.”
The longer the savings plan runs, the greater the impact: after 10 years, the portfolio assets in the model calculation are around 51,000 euros, of which over 70 percent were paid in by the owner. After 30 years, the portfolio value is 461,730 euros. Then only a good third is accounted for by the owner’s own deposits, with almost 300,000 euros being an increase in value due to returns and compound interest.
However, after selling their shares, investors cannot collect the entire fund assets. 26.375 percent of the capital gains generated go to the tax authorities for capital gains tax and solidarity surcharge. But even after taxes, around 407,000 euros remain.
Were the potential savings enough motivation? The FOCUS online ETF savings plan comparison gives you a compact overview of the best brokers with savings plan offers. If you give up smoking, you will be making a virtue of it in more ways than one.
The calculated cigarette costs are based on information from the German Cigarette Association on price developments over the last 20 years. The annual increase in value in the savings plan calculation is 7.2 percent. According to calculations by Röhl Capital GmbH based on Bloomberg data, this corresponds to the average return on 15-year ETF savings plans on the MSCI World over the last 40 years.