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Save a million dollars

By Judy Martel · Bankrate.com
Tuesday, May 31, 2011
Posted: 9 pm ET

Remember when the book "The Millionaire Next Door" was published in the mid-1990s? Back then, when the economy was in the midst of an upswing, the notion of wealthy people driving 15-year old cars and living as if they were solidly middle class seemed quaint.

As the good times rolled on, credit became easier to obtain and the standard-bearers for wealth shifted to those with the showiest lifestyle. Meanwhile, the savings rate for Americans dropped into the negative for the first time since World War II.

But now, as people try to recover financially from the recession, those who continued a dedicated savings program are looking pretty savvy. Not only did they have extra cash on hand to deploy when the stock market crashed -- in effect buying on sale --but they have the means to ride out the downturn in the housing and stock markets and they're not digging out of debt.

Good old-fashioned saving is still unsexy due to the low rates, but being financially secure is not. CD rates are likely to suffer for a while; banks simply don't need the deposits so they have no reason to entice savers with high rates.

But that's no reason to put aside saving. Anyone aiming for financial independence would do well to maximize savings through tax-advantaged retirement plans like 401(k)s and after-tax plans too. Although the stock market will earn a better return, you can't control performance, so use savings to add some stability.

Bankrate's compound interest calculator can give you an idea of what your deposits will earn over time and you can compare your savings rates with others by using this calculator. Finally, if you want to save a million, remember that a dedicated savings program will get you there, but you need more interest than banks can pay. Deploy some of your savings in the stock market to get the desired return and you'll reach your goal much faster.

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