Dale Jackson

Sure, a million dollars isn’t what it used to be, but it’s still a good chunk of cash to retire on.

With good planning, discipline, and an early start, that million-dollar milestone could be all yours. Knowing how to reach that goal requires a mathematical understand of compounding. One good illustration involves using the ‘rule of seven’ to explain what you need to save each month to be a millionaire at 65 years old.

It involves two assumptions: \$10,000 in savings and an annual inflation-adjusted growth rate of seven per cent.

The longer you wait, the more you need to contribute each month.

25 YEARS OLD: WILD AND FREE

If a 25-year old with \$10,000 invested \$320 a month at a 7 per cent annual compound rate of return until they turned 65, they would wind up with \$1 million.

At 7 per cent, your money doubles roughly every 10 years.

35 YEARS OLD: KIDS, HOUSE PAYMENTS

Instead of \$320 per month, you’re looking at saving \$775 a month to turn that \$10,000 into seven figures. With kids and a mortgage, wouldn’t it be better to keep contributing \$320 a month?

45 YEARS OLD: ESTABLISHED

You’re in your high-earning years but you’ll need to add \$1,850 every month to that \$10,000 base in order to reach \$1 million in 20 years.

55 YEARS OLD: THE STRUGGLE

Now the amount needed to reach \$1 million with a \$10,000 bankroll is \$5,700 a month for 10 years. \$320 a month thirty years ago would have been so much easier.