The Best Kind of Super-Spreader

In elementary school we all learned about multiplication. And we all know how practical that is in solving math problems. But it’s pretty important in other issues as well. Today I’m going to focus on compound interest. Compound interest means that as your investments grow, you earn interest on your accruing interest. This makes your investments grow faster and faster as time passes. This is why it is so important to start your retirement savings when you are young.

Until recently, the best example I had of how compound interest multiplies is this shampoo commercial from my childhood:

But this is 2020. Everything is being viewed in a new light this year. So I’m going to go ahead and say it. Compound interest on investments is like a Covid super-spreader event. A group of people gather and one of them unknowingly carries the coronavirus. By the end of the even, the virus has spread to 10 more people. Each of those 10 goes home and spreads the virus to one or two more people. Who then spread it to another one or two. Who then spread it to another one or two. And so on. And so on. And so on. Before you know it there are 100 cases of Covid that all link back to that super-spreader event.

Ok. Enough of the 2020 doom and gloom. Let’s get back to talking about money. When I was in graduate school (back when dinosaurs roamed the earth) I was furious that the Community College where I was externing withheld $300 per year from my meager stipend to go into the Ohio State Employees Retirement Fund. Retirement was the last thing on my mind at that point when I was having trouble making rent. But I couldn’t stop it. Fast forward a few years and I rolled it into an IRA and forgot about it. Now I look at that tiny $600 investment in an entirely new light. That IRA has grown more than tenfold (despite the Gen-X curse of having three “once in a lifetime” stock market crashes [2001, 2008, and 2020] between the initial investment and now). And the bigger it gets, the faster it grows. I wouldn’t want to try to retire on just that, but it never ceases to amaze me how that tiny amount has grown over the years…all because I’m earning interest not just on the original $600, but also on all of the interest that has accrued on it over the years.

Invest early. Even if it’s only a little bit. It could (and SHOULD) turn into a super-spreader!

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