Yesterday, one of my jobs was to shake the hands and congratulate high school graduates as they received their diplomas. They were ready to tackle the world and full of smiles. One of the many thoughts that ran across my mind as they walked across the stage was the lesson they probably didn’t learn while they were in school. Oh how I wish that they understood the power of compounding and the big influence that time has on the equation. My friend, Danny Williams, calls them compounding periods. The vast majority of these young kids have a significant number of compounding periods.
If they can earn 12% on their money, it will double every 6 years. In 48 years (18 to 66), invested money would double 8 times (48 / 6). If they started out with $1000 from graduation and a summer job, it would grow-up to be $256,000 over those 48 years. If they would add $100 a month over that same 48 years to the initial $1000, they would have $3.38M! (They would contribute $58,600.) Time is a great ally in their financial future. It can be powerfully harnessed or let slip by.
No matter how old we are, we have compounding periods in front of us that can be harnessed. Are you taking advantage of them? Would you do a favor for me today? Please find a graduate or young person in your life and share the power of compounding and the big influence time has with them? It is one of the most critical lessons they will ever learn.