If someone offered you the choice to take a $1,000,000 on day one or take the sum of $ .01 (a penny) doubled everyday for a month (31 days), which would you be more likely to choose?
Well, perhaps some of you have already stopped reading this to find a calculator and figure out the best choice.
If you chose the penny on day one, most of the month the amount would be no where near the one million mark. By the end of week two, the amount would be $81.92. A few days into the third week, the amount would be $655.36. Pretty slow incremental increases.
However, by day 28, the million dollar mark would be crossed and therefore day 29, two and a half million. And of course on day 30 more than $5,000,000. Therefore on day 31, after patiently waiting, the amount would be over $10,000,000.
The wonders of compound interest! What a concept! The story of choice as described above is taken from a story in The Slight Edge.
So how else can we observe the beauty of compound interest affecting us? When we think about it, don’t we have compounding effects of every action we take during our lifetime. Let’s think about the actions we take to do some daily activity that we do over and over again. It could be something for our work life or it could be for health reasons.
What happens when we are diligent about the daily activities? Don’t we notice a positive result? And what about when we are not diligent about doing what needs to be done? Probably most have experienced the result of that as well, and realize that is not the way to get a good result.
How do you feel about the compounded effect of your life situation right now?