Owen Raskovich

Maybe I'll back this up, say, what is compound interest?

We've done a whole episode on this and it's probably the most important episode ever.

But compound interest is if I give you a dollar today, I say to you, I want a dollar and five back in a year from now.

But then I say, I want maybe, I don't know, even a little bit more than that if I give it back to you the second year.

So it's interest on interest.

And the easiest way to know that compound interest or just the time value of money, as we call it, is a real thing, is go up to any four-year-old and say to them, hey, I'll give you

a dollar now, or you can have a dollar five in a year from now, they're going to take the dollar now.

And that shows you that the dollar now is worth more to that young person right now, in this very moment, because they don't appreciate the long-term benefit of investing that money.

So if I said to them, I'll give you a dollar five, that's 5% interest.

Most of us are just seeing here and now, but the true benefit lies from sacrificing that money for long-term gain.

And that is compound interest.

And we've, again, I've just butchered it, but we've done a full episode on this.

And here's the simple maths, all right?

Just remember these numbers.

The rule of 72, if you invest at a 10% return, it takes just seven years or just a little bit more to double your investment.

Now that's after tax, which we'll get to in just a moment.

If you achieve a 5% return, it takes 15 years to double.

These are simple numbers, but when we think about 10 years into the future, 7 years into the future, 15 years into the future, we really can't appreciate it.

We're just like that 4-year-old that takes the money here and now.

But I tell you what, folks, I've been doing this long enough now to realize that there is tremendous power in foregoing that money and getting the long-term benefit.