The magic of compounding interest
Imagine you are given a choice.
Someone will give you $3 Million. Cash.
Or, you can elect to receive a “magic penny” which doubles in value every day for 31 days.
Quick. What would you pick?
After five days, the magic penny would be worth 16 cents.
On day 10, $5.12.
On day 20, $5,243.
After a slow start, now things start to get interesting.
On day 25, $167,772.
And, by day 31, our magic penny is now worth $10,737,418.
In his terrific book, The Compound Effect, Darren Hardy uses the magic penny to illustrate the power of compound interest.
Why is the story so hard for us to believe?
Because it takes much longer to see the payoff.
Very few things are as impressive as the magic of our compounding penny.
And, amazingly the compound effect is equally powerful in other areas of our lives as well.
Reflection: Think of an area in my life where I’ve benefited from taking a long-term perspective. Do I have any upcoming decisions where I should consider giving up immediate benefit for a greater long-term reward?
Action: Journal about the questions above.