I like to remind my kids sometimes that when their mom and I got married, we had nothing. We actually had less than nothing because our debts, mostly student loans, far exceeded our assets. But we did have two other very important things: the brains in our heads, and a commitment to start saving and building wealth as early as possible. In a few years, when my children begin their careers, I suspect they will both be in a similar position. Rather than being discouraged, I want them to embrace the challenge before them.

First, they’ll need to understand that preparing for a financially secure retirement is a multi-decade long project. There are many ups and downs on that long journey, as well as unpredictable twists and turns. Early on, it can appear that very little progress is being made; the dollar amounts involved are usually small, and it can be hard to dig out of debt — especially if the interest rates are high. They should also understand that most of the “magic” of compounding returns occurs in the final few years, but that it often doesn’t feel like that will ever happen in the beginning.

Secondly, I want them to know that there are three helpful milestones that can guide them along the way. Each goal should be celebrated individually as an accomplishment and can hopefully assure them that they are in fact on the right track. The second two milestones are especially useful because they demonstrate how the balance is slowly shifting from your labor doing all the work to your money beginning to do some of the work for you.

The first milestone is when your net worth changes from negative to positive.

For many young workers and recent graduates, the first few years of adult financial life can feel like running uphill. Student loans, car loans, credit card balances, and the general cost of getting established can easily exceed whatever small amount has been accumulated in checking, savings, or a first retirement account. In that stage, net worth may be negative even for someone who is doing everything right. But each loan payment is doing two things at once: it is reducing liabilities and gradually pushing them closer to a positive net worth. Eventually, as the debts shrink, assets grow enough that the balance sheet finally crosses into the black. That may not sound glamorous, but it is a major accomplishment, and it means that the real building phase can begin.

The second milestone is when your portfolio saves more than you do – in other words, the portfolio itself may now be adding as much wealth in a typical year as the worker is contributing from wages. This milestone usually arrives more quietly, but it may be even more powerful. Early in a career, annual savings typically matter far more than portfolio returns because the account balance is still small. If someone earns $75,000 per year and saves 20%, they are adding $15,000 per year to their portfolio. At that stage, a $25,000 or $50,000 account is helpful, but it is not yet doing the heavy lifting. However, if that same worker eventually accumulates about $200,000 in an 80/20 portfolio, a reasonable long-term average return assumption of 7.5% would equal roughly $15,000 per year, an amount equivalent to their own annual savings.