THE NEW RULES OF RETIREMENT SAVING • 97
If Columbus Had Found a Penny . . . In elementary school, we all learned the rhyme, “In 1492, Co- lumbus sailed the ocean blue” to help us remember the date. Well, what if (and you have to use your imagination here) ol’ Christopher had found a penny on the beaches of the New World. Instead of putting it in his pocket, he invested it in an account earning 6 percent interest. Let’s say he found someone whom he could trust to carry out his instructions and told them to leave the penny in the account but take out the interest every year and put it in a piggy bank. By the 21st century, that piggy bank would have about thirty cents in it. No big deal, right? But if Christopher Columbus had placed that penny in an ac- count returning 6 percent compound interest, the account would be worth more than $121 billion today! You don’t believe me? Okay. I discovered this illustration in 2009, which is 517 years from 1492. Go ahead, you can check my math. Your initial invest- ment of one penny, each time it is compounded, will be 106 per- cent of its original value, right? So that 106 percent is taken times itself, or compounded, 517 times. Pull out your calculator and type in 1.06 multiplied by 1.06, 517 times. Then multiply that answer by 0.01, your penny, and you should come up with $121,096,709,346.21. Can you see now why Albert Einstein was so impressed with compound interest? Granted, you are unlikely to live 517 years to collect on a one-cent investment, but it makes the point that saving early can greatly increase your chance of success. There have been scores of books written about compound in- terest, and a quick Google search will give you more reading ma- terial than perhaps you need. So I’ll just say this: everything you put away today is pennies. Every day you defer putting those pen- nies away, you defer that amazing outcome.
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