If you are like me then you are going to want to retire early from your job and have plenty cash saved away to enjoy it. By putting away money each month and locking it into a savings bank account, you can earn returns with compound interest.
In this post we take a look at how much you need to be earning, saving and how long it will take you to accumulate $1 Million.
How To Make $1 Million With Compound Interest
Firstly, you are going to want to be earning a good income each month. See here for ways to make money and improve your income.
Secondly, you will want to be financially free to a relative degree. It is inevitable that bills and mortgages will eat into your savings. If you want to see how you can save money, check out this post.
Thirdly, the length of time you plan to save money on a regular basis will determine how much you have to save each month if you intend to retire a millionaire.
Another important factor that will determine whether or not you will end up a millionaire upon your retirement is your bank’s interest rates and fees. Ideally you are going to want to have a savings account that is going to give you a 5% or 6% return on your investment. 6% investment rates are very hard to find so you will have to do your due diligence to find an account that can give you such generous returns.
Below are some scenarios as to how you will become a millionaire by saving regularly and gaining through compound interest.
Scenario 1 – You are 20 and saving for 45 years
I will admit this one is not so realistic as compared to the others. There will be very few 20 year olds with $20,000 in the bank saving $350 a month with a 6% return over 45 years.
Base Investment: $20,000
Annual Interest Rate: 6% paid quarterly
Investment Period: 45
Regular Monthly Saving $350
Balance After 45 Years: $1,252,086.42
Scenario 2 – You are 30 saving for 35 years at 5% Interest
This is a more realistic compound interest scenario on how you will accumulate £1 Million. When you are 30 it is likely that you will be at a point in your career where you will be on a decent salary, you may be married so with combined salaries with your spouse, savings may be easier made.
In this instance, you start with $20,000 with a 5% interest rate saving $900 per month consistently over 35 years, on your 32nd year you will become a millionaire.
Base Investment: $20,000
Annual Interest Rate: 5% paid quarterly
Investment Period: 35
Regular Monthly Saving $900
Balance After 35 Years: $1,135,869.28
The figures above were worked out using the compound interest tool from The Calculator Site.
Retiring a millionaire is certainly achievable, however it is important that you have a high paying salaried job and be able to save regularly in order to achieve your goal.
Want to know how you can generate a side income to help you become a millionaire quicker? See our page on how to make money.