illustration on saving money

The more you save and the better the interest rate, the sooner you'll become a millionaire. However, a million dollars will be worth less in today's dollars.


Investments and Compound Interest

If you save money every month, for a long enough period of time, you will become a millionaire. Sound too good to be true? Well, as Einstein reportedly put it, compound interest is the "eighth wonder of the world."

Becoming a millionaire depends on how much money you currently have saved, how much interest that money will earn, how much you can save each month -- and, of course, how long you can wait before making a withdrawal.

To zero-in on the specifics, use an online calculator (such as CNN Money or Bankrate) to determine how much you need to save each month in order to have a million dollars by a specific age. For instance, if you're 30 years old, have $5,000 already, save $100 per month, and earn 8 percent interest, you'll be a millionaire in a mere 50 years -- at the ripe old age of 80.

Now, what if instead of 8 percent interest, you invest your funds well and can average 10 percent earnings? It's not far-fetched. On average, the stock market averages an annual return of 10 percent [source: Krantz]. And when that happens (assuming you start at age 30 with a $5,000 nest egg, and invest an additional $500 each month), you'll be a millionaire in 29 years at age 59. But there is a catch: inflation.

Most online investment calculators will also tell you how much that million will actually be worth by the time you've finished amassing it. Because of inflation, in 50 years a million dollars will only be worth about $228,000, which probably won't be enough for financial freedom.

If you'd like to target a financial goal for retirement, use an online retirement calculator, such as the MSN Money retirement calculator. By plugging in your current expenses and an estimate of your expenses once you retire, you can come up with a more realistic financial goal for retirement. You may find that you need to be a multimillionaire in order to retire with the lifestyle you want.

Of course, simply being a millionaire (or multimillionaire) at retirement isn't everyone's goal. Most of us would like to experience the millionaire lifestyle sooner rather than later. We want financial freedom so that our investment interest is enough to pay our living expenses. In that case, let's talk about how you can make that happen.