A good exercise on the Time Value of Money. At first blush is sounds like a no brainer, $1M is a lot of cash and a penny is not. While Albert Einstein may or may not have said that compound interest is the most powerful force in the universe, it is a pretty handy concept, especially for reaching Financial Independence and Retiring Early (FIRE).
Now to the math.
Were you surprised? Probably not. If you haven’t heard of this particular exercise you were still most likely able to determine that the most obvious answer wasn’t the correct answer.
So of what use is this? I’d have a tough time finding someone willing to pay me 100% DPR (Daily Percentage Rate) unless I was the world’s best loan shark. What this exercise is good for is as an introduction to the value of compounding and the time value of money. This can be a good exercise to do with children as they start to handle and make decisions about money. As I discussed in a previous post, my youngest son does best with saving his money when it is automatic and he doesn’t think about it. This works for adults as well.This entry was posted in Retirement Stuff by Rich