Any financial expert will tell you that it’s important for your financial future to save, save, save, whenever possible. That can be difficult if you’re not making a lot of money in the first place, but a recent CNBC “Make It” feature illustrates how socking some money away on a regular basis can make you rich — a millionaire, to be precise — in a matter of decades, should that sort of hypothetical scenario interest you.
In this hypothetical scenario, let’s say you’re ready, willing, and able to carve out $500 from your income every month and slide it into an investment account. At that point, the time it takes you to hit that magic number depends largely on interest:
“With a 4 percent rate of return, you’d become a millionaire in 51 years, by 2069.
With a 6 percent rate of return, you’d become a millionaire in 40 years, by 2058.
With an 8 percent rate of return, you’d become a millionaire in 33 years, by 2051.
With a 10 percent rate of return, you’d become a millionaire in 29 years, by 2047.”
Those figures were reached by way of the CNN Money “millionaire calculator,” which lets you plug in your own figures for your own fiscal edification.
If you don’t feel like waiting 30 years to see seven figures to your name, but you don’t want to depend on striking it rich either, you can take a gander at a couple additional savings benchmarks. If you can afford to save $2,200 a month, you could be a millionaire in as little as 20 years, while putting away six grand a month could get you there in half that. And when choosing a mode of saving there are two very important words to remember: Compound interest.
Of course, this is all dependent on plenty of unforeseen variables, including financial emergencies, peaks and valleys in the stock market, and personal windfalls. But it does serve as a good illustration of the financial power of saving, and if you’re one of the few Americans who can afford to bury hundreds per month towards your future, you should count yourself extremely fortunate.