The Power of Compound Interest

[STGS]

I am sure some of you saw the Financial Tip of the Day post concerning Roth IRAs for kids. Well, the driving force behind that one was compound interest.

Here is another example of that power. Scroll down after you think about it and see how close your guess is.....

If Christopher Columbus had invested $0.01 (1 cent) when he arrived in the Americas (1492), never added any more $$ and earned 8% annually, how much would he have today?





Answer is below......
















$4.4 Quadrillion Dollars. That is 4,000 Trillion dollars, all from 1 penny.

If you don’t believe me, put those numbers into any financial calculator or app. I promise I am correct.


80% of financial success stems from the simple act of saving and not spending. The small remainder comes from how and where you invest.

Good luck and I will post more if you like this type of info.

[RMW]

That is just crazy!

Don’t think there is that much money on planet earth

[Acameron52]

Crazy for sure. I am 25 and trying to take as much advantage of it as i can!! Between my pension at work, maxing out a ROTH and putting into my 457 I’m hoping to be able to retire with no worries in 30 years. It sucks seeing it go out now and not having anything to show for it but will be well worth it in the future.

[ThisLadyHunts]

Sending this to my young, single, working daughter. She can be pretty tight-fisted with her money but we’ve trying to get her to be smart about it as well. Locking it away in an IRA is just as bad to her, I think, than not having it at all. Perhaps this analogy will make more sense to her.

[eradicator]

He would have had to start over after 1929 more than likely

[Landrover]

The most powerful force in the universe.....Albert Einstein!

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[ra61hunting]

If CC had a penny it was counterfeit since pennies weren't invented for another 200 plus years.
I take your point about compound interest. My favorite example is that for one 30 day month you can have 1pennie the first day and double it every day for the month or just take 100,000 dollars one time. Which offer do you take?

[STGS]

Originally Posted by ra61hunting

If CC had a penny it was counterfeit since pennies weren't invented for another 200 plus years.
I take your point about compound interest. My favorite example is that for one 30 day month you can have 1pennie the first day and double it every day for the month or just take 100,000 dollars one time. Which offer do you take?

The penny every time. My rough math says 5.3 million and change on the 30th day.

[RascalArms]

Wow...impressive.

[eradicator]

Now if only we can get someone to guarantee that equation with our investments......

[eradicator]

Hypotheticals are awesome

[Leonhogboy]

How much is the time value of money and the rule of 72 taught in schools anymore?

[60 Deluxe]

Time is your friend. If I ever figure out how to live 600+ years, I'll invest a penny. LOL
8% compound interest is the kicker. There were a few years that it was easy to get that but with today's cheap money Federal Reserve Bank rates, sub 1% is much more common. When people can get thirty year mortgages in the mid 2% range, 8% is not realistic without big risk.

[Slicefixer]

Originally Posted by 60 Deluxe

Time is your friend. If I ever figure out how to live 600+ years, I'll invest a penny. LOL
8% compound interest is the kicker. There were a few years that it was easy to get that but with today's cheap money Federal Reserve Bank rates, sub 1% is much more common. When people can get thirty year mortgages in the mid 2% range, 8% is not realistic without big risk.

I sure get the OP's point in regards to saving and totally agree.

However, with 30 trillion in debt (that we know of.... audit the Fed and it's probably double) 8% is a bit unrealistic.

If the Federal Money Fairy handed you a $100.00 per second it'll be 320 years before ya got a trillion. These a-holes in DC spend it like it's "found money." Which, to therm, I guess it is......

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[wes122984]

yeah in the last 2 decades you are actually losing money to inflation if you are in compounding interest vehicle.

[curtintex]

Just as important as saving, is analyzing compound interest from a debt perspective. I guarantee you there are more TBHers with debt than there are with savings. Compound interest will absolutely kill you from a debt perspective. That **** works against you while you’re working, while you’re sleeping, while you’re on vacation, while you’re charging something else on that credit card or while paying $700k over 30 years for a $200k house. Before anyone worries about compound interest working for them, they should eliminate it working against them. In my humble opinion.


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[Slicefixer]

Originally Posted by curtintex

Just as important as saving, is analyzing compound interest from a debt perspective. I guarantee you there are more TBHers with debt than there are with savings. Compound interest will absolutely kill you from a debt perspective. That **** works against you while you’re working, while you’re sleeping, while you’re on vacation, while you’re charging something else on that credit card or while paying $700k over 30 years for a $200k house. Before anyone worries about compound interest working for them, they should eliminate it working against them. In my humble opinion.


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Yep....👏👏👏...100% One of the most overlooked changes that's occurred over my lifetime is the universally accepted definition of "afford".....

My Ford dealer hunting buddy recently told me this. The number 1 concern of the vast majority of his customers is one thing...."what's the payment?" A Toyota master mechanic also told me recently that Toyota is now offering 10 year financing....10 years? On a vehicle?

Financing a business is understandable and quite often necessary, an absolute. 15/30 @ 2%/3% on a home is understandable, but, 10 years on a vehicle....boat....etc?

I just have a hard time getting a handle around this "stacking debt" mindset. However, it's not any of my biz....

IMOP, it ain't going to end pretty for a lot of folks....

[Landrover]

Originally Posted by curtintex

Just as important as saving, is analyzing compound interest from a debt perspective. I guarantee you there are more TBHers with debt than there are with savings. Compound interest will absolutely kill you from a debt perspective. That **** works against you while you’re working, while you’re sleeping, while you’re on vacation, while you’re charging something else on that credit card or while paying $700k over 30 years for a $200k house. Before anyone worries about compound interest working for them, they should eliminate it working against them. In my humble opinion.


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In for the game ending WIN!!!!

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[Landrover]

Originally Posted by Slicefixer

Yep.......100% One of the most overlooked changes that's occurred over my lifetime is the universally accepted definition of "afford".....



My Ford dealer hunting buddy recently told me this. The number 1 concern of the vast majority of his customers is one thing...."what's the payment?" A Toyota master mechanic also told me recently that Toyota is now offering 10 year financing....10 years? On a vehicle?



Financing a business is understandable and quite often necessary, an absolute. 15/30 @ 2%/3% on a home is understandable, but, 10 years on a vehicle....boat....etc?



I just have a hard time getting a handle around this "stacking debt" mindset. However, it's not any of my biz....



IMOP, it ain't going to end pretty for a lot of folks....

......and when it ends badly they will blame everyone but themselves!!!! I definitely look to pick up some "fire sale" homes come the 2nd quarter of 2021 if projections come true. Could be worse than 2008.......

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[Matt_C]

Originally Posted by Landrover

......and when it ends badly they will blame everyone but themselves!!!! I definitely look to pick up some "fire sale" homes come the 2nd quarter of 2021 if projections come true. Could be worse than 2008.......

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You must be taking into consideration that democrats are going to win too....

[Landrover]

Originally Posted by Matt_C

You must be taking into consideration that democrats are going to win too....

Not at all. The market MUST reset. Our debt is due.....overdue. Mother Theresa can take office and the same financial scenario will be in play.

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