One single dollar turning into 10 billion? They don’t even have lottery payouts that pay 10 billion. There is no way. What if I told you there were two simple things that would make you rich. What if all you needed was to invest and then….. wait.
I mean actually physically wait. That’s it. Invest + Wait = Rich. Put another way you need Money (Investment) and Time (The darn wait part). Time and money… hmm that sounds like – Time Value of Money.
That is what we are going to talk about today. If you let you money sit and grow – it turns into a big pile of money. This will also be yet another example of how bad our human brains are with exponential growth patterns.
Maybe you are familiar with this riddle. Let’s say you have a pond with a couple lilly pads. For some reason these pads have some weird mutation, I suppose, that cause them to duplicate themselves everyday. If on day 1 you start with 3 lily pads – and on the 30th day the entire pond became filled with pads. What day would half the pond had been covered with lily pads? No need to wait on the answer – Day 29.
Or maybe a little more mind bending. One grain of sand has 43 QUINTILLION atoms. So an atom is pretty small. Let’s say a scientist figured out a way to do that whole lily pad doubling thing with one atom on accident. Every second an atom would duplicate into another. 1 becomes 2.. becomes 4…etc
If you are thinking after a day I’m sure things would be bad -you are wrong. In less than 5 minutes there would be more atoms than could fit into the entire universe. Go ahead put 2^277 into your calculator.
Now things aren’t quite as crazy with compounding interest – because our money doesn’t grow that quickly. So let’s go back to our little ole dollar.
Let’s say your great, great, great (and so on)… grandfather was here in America 300 years ago. Fun Fact! John Tyler the 10th president of the United States, still has 2 living grandsons! Google it.
Anyway, if that grandfather put their money into a bank that promised to keep up with inflation – let’s use 2% interest rate of return- how much would you have today? How lucky would you be in this scenario if your grandfather set up this inflation proof checking account that only you could touch 300 years later? You would have…$380.23 dollars!
Me: *Opening up 300 year old magical inflation piggy pank* “I’m going to be rich!“
Me: “380 dollars! That’s half a macbook pro! Woo”
Now let’s say your grandfather wasn’t a dummy and he instead put his money into stocks (which I’m pretty sure did actually exist back then). Now even though the market has averaged a rate of return between 10-10.5% – let’s just say you adjust for inflation and you only get 8% for a rate of return.
So 1 dollar – no more added in – 300 years later would be: $10,644,533,818.25 – Yep 10 Billion dollars. That is Time Value of Money.
Compounding once a year. Feel free to check math at https://www.calculatorsoup.com/calculators/financial/future-value-calculator.php
Now keep in mind that you might live forever (Thanks Science!). Even if not – think if you live 100 more years. What if you tucked away more than just a single Washington? What if you saved a Lincoln, a Hamilton, a Jackson, or Frankl… okay I’ll stop showing off my presidential money knowledge.
The point is if you aren’t saving your money like crazy and just simply waiting. You could quickly fall behind the curve – and you’ll be looking at that future 380 bucks thinking “what could have been…”
The Breakthrough 