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So you want to be a millionaire? Save, save, save.

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(Read caption) Making your first million is the hardest but if you start saving a significant portion of your income at an earlier stage, you could reach the line quicker. After the first one, it gets easier.

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Recently I fielded an interesting question from a young investor: “How can an average college grad accumulate $1 million?”

Now, $1 million is not what it used to be. It is certainly not the ticket to the good life that it was 20 or 30 years ago. But it’s still a really nice down payment on it. Plus, they always say the first million is the hardest.

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I decided to conduct a little thought experiment to determine what it would take someone graduating from college, from a standing start, to accumulate $1 million. According to the National Association for Colleges and Employers, the average starting salary for a college graduate was about $45,000. Additionally, the Bureau of Labor Statistics shows that the unemployment rate for those with a bachelor’s degree or higher is 3.2% as of November. So it seems like a good assumption that a bachelor’s graduate could reasonably expect to find employment, even in today’s slow growth economy. I constructed a little spreadsheet with the following assumptions:

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  • Starting salary of $45,000
  • 3% raise per year
  • 10% initial savings rate of gross (pre-tax) salary
  • Every year 50% of our grad’s raise goes to increase savings
  • Earnings on investment of 6.5%

And the result: 25 years. Which means if you started at age 22, you could reasonably expect, depending on your investment returns, to have $1 million by age 47.

There are some interesting details in this thought exercise. If you follow the assumptions above, you will be saving over 50% of your income by the time you are 50. I suspect that this is not a reasonable assumption for most people (although it works great for this guy). If you change the assumptions to stop raising your contribution level once you hit 25% of your salary (year 11), then you don’t hit a million for 28 years, or a decrepit 50 years old. How about if you start saving 25% of your salary in Year One, and never change it? Same result: 25 years. How about higher investment returns? At a 7.5% average return, you shave one year off your goal and get there in 24 years.

What can we learn from this exercise? Here are three important things:

  • You need to start saving—the earlier the better.
  • You need to save a significant portion of your income. You can either start high and leave it, or start low and increase every year. But you need to get to a big percentage of savings.
  • Investment returns don’t matter as much as your saving rate.

The good news: Once you reach the $1 million mark, it gets easier. If you never contribute another dime, you can expect to get your second million 12 years later; and your third, nine years after that. Maybe the first million really is the hardest.

By Brian McCann

Learn more about Brian on NerdWallet’s Ask an Advisor