The magic that is compound interest!
I have a few regrets, I also believe most people do regret something….
Don’t kid yourself on this.
There is a regret that I have and it is the regret of not grabbing the concept of compound interest until my later days.
If only I knew then what I knew now. I would have taken a different road.
It would have been nice to know it way back in the day, maybe someone tried to tell me or I read it somewhere, I just didn’t take it in or put it into some decent context. I have some vague recollections. I think I remember the webpage of something like the automatic millionaire that illustrated the guy who saved a monthly amount and the compound delivered a millionaire status for him after the compound interest kicked in.
I remember reading it before going shopping and spending my wages. When your young, old is a long way off and there is always time. Right?
The illustration that was used for the magic of compound interest for that example was for an investment that returned 10% every year, not sure if it was a bank account or a portfolio investment, which at the time I knew very little about, but 10% even back then was unrealistic.
This is one of the frustrations I have with the way this idea of compound interest is being demonstrated. This simplistic idea of 10% compounded for 40 years will give you the life you want. It is cool to show it like this, but it should be more illustrative of a real life situation. People (Young people) are smarter now than back in my day (sweeping statement – I know) because they deal with so much information but this is also the reason to get the narrative more realistic. If it isn’t properly reflective then they will skip right over it.
Go with something like; save early this X amount, add to it as you go and top-up when you can, keep saving and when you get the opportunity save the big chunks of change that you get as a windfall… and then this is the life you could have – at the age of 50 all thanks to the fact that you started early. You smarty pants!!
The demonstration could then go further and show how it can sustain you for a lot longer than you think because your savings will keep growing at a compounded rate and the calculations are then just that bit more complex, but more realistic.
Stop. I will stop at this point and change course on a 180 degree turn, you see…
I am hypocritical on this because I used the simple model to finally convince my daughter to add some of her savings into another account to help it grow faster. She had money in a bank account that was giving her less than half a percent on interest – compound that out and it is nothing in the long run.
Shocking to be honest that banks treat savers in such a way… maybe a post for another day… any way,…
Again the frustrations. Where do you get this 10% growth for 40 years. Anybody? – maybe in a stock market linked fund on average, but maybe not.
Anyway, I tried to convince her with the more complex model to no avail. She didn’t have the patience for the calculations. So I reverted to the simple model. She got it and moved her money into something that would give her a better interest rate.
Parenting Job done!
However, I see the gap in the market…. unless I am wrong.
Is there a book, webpage, instagram or whatever, that is out there and that is able to tell that story from a life-perspective that can catch the imagination of a 22 year woman? A story that can capture the mind of someone that has got so much going on that she needs to be inspired enough to make constant changes?
If there is something that exists, something that ticks these boxes, then please recommend it to me and others.
Because, I have a seventeen year old son to convince and he is a touch more stubborn.
Please help us. : )