So you want to be a millionaire?

Let's say you were among teenagers that worked a summer job. And let's say at 15, you were able to earn $2,000 and you were so determined to be a millionaire that you invested every penny in a mutual fund that invests in the stock market.  You picked what's known as a Standard & Poor's 500 index fund and from then until you retire you earn on average 9.5 percent a year on that investment.  And let's say each year from age 15 to 21 you invested another $2,000, from each of your summer jobs, in this same index mutual fund earning 9.5 percent. 

You will have invested seven years of summer pay, or a total of $14,000.  If you left that money invested year after year, and by the time you retire, you will be a millionaire.

Now, I did not assume that you invested any new money after the age of 21!  But what if you kept investing $2,000 a year from that point until retiring?  Then, you'd end up with a little over $2.1 million!

So you didn't start saving at 16? See the table below to see how much you'd need to save to be a millionaire by the time you reach age 65.

Note: I assumed a constant 9.5% return at all ages. At ages closer to retirement, you can't take the risk of investing all your money in stocks so you may need to save more per year in a fund containing both stocks and bonds.

Saving money early -- not even often, just early -- will ultimately lead you to $1 million in wealth at the time of retirement. The key always is to save early. That's the hardest part. Most people don't start thinking about saving until their 40th birthday. But if you start early, it makes a big, big difference down the road.

To see additional ideas that lead you to financial freedom, review the 10 Steps to Financial Freedom advised by A.D. Financial Planning.

To discuss savings strategies, types of investments or investment accounts or just where to begin on your path to financial freedom, contact A.D. Financial Planning.