What would happen if you double a penny for 30 days? There is an adage that states, “a penny saved is a penny earned.” Have you had about that? It even gets better. Several millions can be earned by doubling a penny. Have you ever heard of the concept of compounding in finance?
This write-up is for the people that desire to identify the secret of long-term wealth creation.
There is this question that you might have comes across (maybe from different platforms that you visit). It goes like, would you rather have $1 million today or have a penny that doubles everyday for a month?
From the face of it, people are likely to be caught in the amounts as they are stated. That is, $0.01 vs $1,000,000.
The first thing that came to mind upon seeing this question was it was more of a trick question. Who in their right mind would try to compare a penny and one million dollars?
I started studying about finance from an early age. Most of it was self-taught as the aspect of having money to purchase whatever I wanted was very thrilling. As a result, I had already learned of the need to think long-term on matters to do with investing.
Thinking long-term enables one to remain persistent and persevere when things do not seem to be moving in the desired direction. This is the same way of thinking that spiraled my head when I saw the question above.
I automatically knew that 1 penny doubled everyday for a month ought to be the best option in this scenario, even without doing the calculations of a penny doubled every day for 30 days.
I can sense that most of you would go with the option of getting $1 million today instead of double a penny for 30 days. It is quite tempting, I understand. This is something that would easily give you Goosebumps. A million dollars placed there, and it is just upon you to decide whether you want it or not.
It is only a small fraction that would go for a penny a day doubled for 30 days. These are the people that would be showing sound finance knowledge.
That’s the best way to go since the mentality applied here is long-term. One is able to delay immediate gratification with the objective of gaining more in the long run.
The mentality of having that $1 million now, is something I could have contemplated some time back. However, my way of thinking on financial matters changed the moment I encountered the concept of compounding money.
You might think that a penny is worthless, but the moment you put the aspect of compound interest, it changes everything. This is something that changed the way I was thinking about saving and investing money.
Maybe you’re wondering what kind of crap I am peddling. I will show you some simple calculations of a penny doubled everyday for a month, that will showcase the power of compound interest.
Watch what happens to the penny over 30 days.
This changes everything. Right? Going for a penny a day doubled for 30 days; you would be getting over $5 million. This gives you an extra $4 million if you ignored the $1 million 29 days or so ago.
This is a concept that can be applied to various aspects of our life. We can take the example of starting a business. Generating profit as you commence a new business can be quite tricky.
There are a lot of struggles being experienced as you try to move forward. However, it reaches a point where the business starts to run smoothly.
Initially, you are putting 80% worth of effort and only generating 20% worth of benefits. When things start falling into place, you start putting in just 20% effort and making 80% worth of benefits.
Have you seen how to double a penny for 30 days is worth more than being given a $1 million right now?
The concept of compounding is something that you can start applying to help improve your financial prospects in the long run.
There are three basic principles that can make compounding work for you.
1. The earlier you start, the better
Compounding can be viewed as a function of the returns obtained and time. Time is a diminishing commodity. As a result, the younger you are, the more time you have to try and make compounding work to your advantage. The earlier you start, the wealthier you will become. Starting right now is the next best thing to starting early.
2. Ensure to make regular investments
There is the option of doing it via the IRA plan or a tax advantage 401K. You can also do it through favorable high yield savings account for the post-tax savings. Making saving a priority is highly encouraged. It is important to remain disciplined as the more you save, the more compounding will work its magic to your advantage. You can start with as little as you can every month.
3. Practice patience
The only time compounding will work is when you allow your investment to grow. Seeing the wonders of compounding returns takes time. As you can see from a penny a day doubled for 30 days table, substantial growth comes in at the very end. It is more of creating a snowball of money with compounding. You will get rich the moment you start young and invest wisely as you let your money grow in the long run.
I hope you have learned something today from double a penny for 30 days concept. I hope you can apply this in your financials and let compounding work the magic for you.