Smart Money Tip #4: The Secret to Compound Interest


In my Smart Money Video Tip series, I have been sharing smart ways to create and grow money. One of the best ways to grow your money is through the magic of compound interest.

“Compound interest is the eighth wonder of the world. He who understands it, earns it.  He who doesn’t … pays it.” Albert Einstein

Today, I want to share a story that demonstrates this concept with the Magic Penny Doubling Effect. If you were given the choice between taking $3 million in cash today or a single penny that doubles in value every day for 31 days, which would you choose? If you have heard this story before, you know the right answer is the penny, right? But why?

You know that picking the penny will lead to greater wealth over the long term. So why is it so hard to pick the penny? It’s because it takes so much longer to see the payoff of choosing the penny.

Let me explain. Let’s say you chose the $3 million cash and your friend chose the “doubling penny” what would it look like?

Day   Your Friend’s $0.01
5    $0.16
10    $5.00
20    $5,000

Well on day five, your friend has 16 cents vs. your $3 million. Day 10 your friend’s penny is just $5 bucks. Day 20, your friend still only  has $5000. So with only 11 days left, it looks like you made the smarter choice right?

Well this is when the example gets really interesting and the power of compounding really works its magic.

Day   Your Friend’s $0.01
28    $1,342,177.28
31    $10,737,418.24

On day 28, your friend’s doubling penny is now worth over $1 million and on day 31 your friend now has over $10 million which is 3 times your $3 million. Amazing right?

Well there may not be anyone who is going to offer you a magic doubling penny or $3 million dollars but you can apply this principle in your life today.

This story is an example of how smart choices plus consistency over time will equal a Dynamic Change in your life.

Smart Choices + Consistency + Time = Dynamic Change

Let’s say you ate a cheese burger, fries and a cola today for lunch. It’s not going to hurt you and it’s not going to help you. BUT if you eat this meal every day for lunch for the next year what will happen?

Or if you go to yoga class today, it’s not going to hurt you and it’s not going to help you very much. BUT if you go to yoga class every day for the next year what could happen?

Smart Choices + Consistency + Time = Dynamic Change

The same principal applies to your money.

If you invest $10 today it’s not going to help you and it’s not going to hurt you, but you invest $10 a day for 35 years at 10% and you will have over $1 million.

Think of how you could find an extra $10 a day with lose change, found money, managing your credit card points, using coupons, working smarter, skipping the $5 latte, getting better gas mileage, selling some stuff on eBay, increasing your fees or asking for that raise, taking the stretch and stepping out of your comfort zone, getting a new quote on your car insurance.

That’s only saving an extra $300 per month. Could you do this? The answer is probably yes!

So my tip is to ask yourself – What small changes can you begin to make in your life today that will equal Dynamic Change and a life of true prosperity for the rest of your life?

Post your comments below or on my facebook page.  I love to get feedback on this concept.




Ready to get financial clarity?

Enjoy your life with the peace of mind that comes with having a proven financial strategy, Schedule a consultation today!

Share this post

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest
Share on email

Three Smart Strategies To Maximize Your Retirement Income

Let me guide you through the first steps to the retirement of your dreams!

Sign up for my free guide!

We hate spam too. We promise not to share your email.