I am not a financial expert (far from it). I am a normal man, mystified by the magic of compounding interest.

Here’s an interesting question: how long does it take to become a millionaire? That’s a tricky thing to evaluate, given the magic properties of compounding interest. Indeed, you might become a millionaire sooner than you think (just like Scotia Bank’s slogan says). This question can be divded in three sub-questions:

  • At what age have you started investing?
  • How much money can you reliably save per year?
  • How much averaged annual interest are you realistically hoping for?

With the answer to these questions in hand (and supposing an effective interest rate of 6% annually), all you have to do is find your answer in this chart:

Google Sheets version

You can browse the different figures to for interest rates from 0% to 15%. I find it fascinating to see the evolution of the resulting heat maps!

For your information, this is how the heat map’s color-coding was chosen:

  • Green : 40 (the target retirement age of the FIRE movement)
  • Yellow: 65 (the traditional retirement age)
  • Red: 80 (the average lifespan of people living in Canada)

This might be too big a logical leap to expect that someone can safely retire at 40 with a million dollars in savings, so please take this with a grain of salt. Did I mention that I am not a financial expert and this is not financial advice? 😄

In order to create this chart in Google Sheets, I had to learn about the NPER function, which calculates the number of payment periods for an investment based on constant-amount periodic payments and a constant interest rate. I had no idea that financial functions like this one where already implemented in the program: neat! It solved me the big headache of having to figure out how to program my cells to achieve the same result!

The idea for this visualization was heavily inspired (if not directly lifted from) The Million Dollar Grid - Four Pillar Freedom.