If there’s one thing we can probably all agree on, it’s that winning the lottery would pretty much top the list of life goals. Unfortunately, it’s not exactly practical for most of us.
That doesn’t mean becoming a millionaire is out the question, though. It just means you’ll have to pay more attention to your savings account.
To help, the team over at the personal finance blog Four Pillar Freedom created a chart that breaks down just how many years it will take you to become a millionaire, based on your annual savings and rate of return, if you’re starting from zero.
First, let’s be clear that being a millionaire on this chart means you’ll have $1 million. The chart doesn’t mean you’re a millionaire in the sense that you just got a Powerball payday, just that you’ll be in the seven-figure club. Now, check out how long it will take you to reach millionaire status according to the chart:
One of the interesting facts from this chart to share with your kid? If you save $1,000 a month with a 5 percent interest rate, you can become a millionaire in just 30 years.
Four Pillar Freedom points out that the more you save, the less investing returns will influence how many years it will take to become a millionaire. If you are saving $50,000 a year and earning 5 percent annual returns, for example, you’ll be a millionaire in 14 years. By increasing your annual investment returns to 10 percent, you’ll only become a millionaire three years sooner.
The opposite is also true (ie: the less you save, the more important it is to invest.)
“By saving just $2,000 per year with 5 percent returns, it will take you 66 years to become a millionaire,” according to the blog. “But by saving that same amount with 10 percent returns, you can become a millionaire in only 41 years.”
FYI, this goes for any age. If you’re 30 and saving $10,000 a year with a return rate of 10 percent, you’ll be a millionaire by the time you’re 55. If you’re 55 and can manage $60,000 a year in savings with a 10 percent annual return, you’ll be a millionaire by 65.
Ready to start saving your money for the future? If you have a 401(k) plan through your employer, that’s a good place to start. You could also invest in an IRA, which is an individual retirement account that you can sign up for even if your employer doesn’t offer a retirement savings plan.
Still not sure where to start? Begin simply, like skipping that iced latte and putting that $2 away for the future. It may not seem like much, but over time, it all adds up.
For more tips on saving your way to becoming a millionaire, click here.