If you took a penny and doubled it every day for a month, how much would you come up with? A hundred dollars? A thousand dollars? How about a million dollars?
Not even close. If you start with just a single penny and double it every day for 31 days, you’ll end up with… $21,474,836.48. Over twenty-one million dollars in a single month! This is an example of the power of compound interest.
Your original penny will have turned into two. But then those two will have turned into four, those four turned into eight, and so on. The growth of your money will have accelerated, or sped up, not only because your original penny was collecting interest but also because all the pennies you received as interest also began to earn interest. And so the growth built up – or compounded.
That’s how we get the term compound interest. That’s how you get rich. And that’s why, when it comes to wealth building, being young gives you a major advantage.
[Ed. Note: The above was excerpted from Michael Masterson's New York Times best-seller Automatic Wealth for Grads... and Anyone Else Just Starting Out.
If you know a young person who's going to graduate this year... or if one of your 2008 goals is to increase your income... pick up a copy. Learn more about this and all of Michael's books at his website.]
Similar Articles:
- The Perfect Gift for Your Graduate – Right about now, you may be wondering what to send your niece for a high school graduation gift. If …
- Tough Grammar: Unusual Plurals – Making a singular noun into a plural one is first-grade grammar. Usually, you just stick an s (or es…
- Is Shiny Penny Syndrome Preventing You From Being Rich? – Have you ever been walking down the street – focused on getting somewhere in record time – only to s…
- Don’t Let Anyone Tell You What You Can — or Can’t — Do – “I’d love to be in the communications business,” Sarah, an accountant, told me. “But I’m an introver…
- Economy and Markets Often Go Separate Ways – It’s official. We’re in a recession. So it’s a good time to explore how the stock market does when t…
- Amortization: How the Un-Sexiest Word in Real Estate Can Make You Rich – There are a lot of high-energy terms in real estate: flip, leverage, cash out, cash in, boom, bubble…
- Malaise – “Malaise” (muh-LAZE) – from the French – is a general feeling of depression or unease. Example (as u…