Would You Prefer to Have $1 Million Cash Right Now or a Penny that Doubles Every Day for 30 Days?
Albert Einstein is credited with saying “compound interest is the eighth wonder of the world.”
To get back to the original question, would you prefer to have $1 million today or one cent that will double every day for 30 days? If you chose the million dollars, you would leave millions on the table.
If you chose the penny and passed up the million dollars, on the second day your penny would be worth two cents, on day three it would be four cents, on the fourth day it would be 8 cents. By day 18 the penny will have grown to $1,310.72. By day 28 it will be worth over a million dollars: $1,342,177. On the 30th day it would be worth an astounding $5,368,709!
If the penny were to be allowed to double for another 30 days, the penny would grow to over $5 quadrillion (five thousand trillion!) dollars.
One of the things this illustrates is that compound growth takes time to make a dramatic difference. For the person who wants to have enough money to retire in comfort, starting early is the key to success, even if the starting amount is small.